Preamble

The House met at Eleven o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

RHODES TRUST BILL [Lords]

Read the Third time, and passed, with Amendments.

CLOSURE MOTION (MEMBER'S PROTEST)

11.5 a.m.

Mr. W. J. Brown: Mr. Speaker, with your permission I wish to raise a matter about which I sent in a protest late last night. Yesterday we debated the issue of bread rationing in Britain. About midnight you accepted the Motion for the Closure, although at that time there were at least a dozen Members on their feet wishing to continue the Debate, which at that stage had lasted for only about four and-a-half hours. After that Division I raised a point of Order. I said that I wished to protest against the decision to accept the Motion for the Closure. It may be that I was out of Order in so doing. I do not think so. Any Member has the right, it seems to me, to protest against what he conceives, rightly or wrongly, to be unduly drastic action by the Chair. It may be that I was out of Order, and if you had said so I would have accepted, as I always have accepted, Rulings from the Chair. But you added the words:
If the hour were not so late, I would order the hon. Member to withdraw from the Chamber.
It is that phrase which I wish to raise. It seems to me that the lateness of the hour had nothing whatever to do with the question whether I was in Order or not. It seems to me that the implication in that statement was that if the hour had been 11 o'clock, or 10 o'clock, or 9 o'clock instead of about midnight, you would have ordered me to withdraw from the Chamber

after making what seemed to me, rightly or wrongly, to be a perfectly proper protest against the acceptance of the Closure. I now ask, By what right did you address that remark to me? I had sat through the Debate. I had notified you of my wish to speak. You had a perfect right not to see me in that or in any other Debate, but I submit that you had no right to address that remark to me in the circumstances existing last night, and I ask by what right you did so.

Mr. E. P. Smith: No one has a deeper respect for the Chair or for you personally, Mr. Speaker, than I have, but, as one of the hon. Members who were excluded from last night's Debate and were on their feet when you accepted the Closure, I wish to associate myself very respectfully with the protest voiced by the hon. Member for Rugby (Mr. W. J. Brown). I happen to be one of, I think, the only two practising millers in this House whose views on the subject of bread rationing might conceivably have been of some practical value to the discussion. I would remind you that when we had a recent previous Debate on the food situation I was the first Member of any party to put his name down to speak, yet, though I sat through the whole of the Debate, I did not succeed in catching your eye. Am I wrong in claiming that on such an occasion as last night I had a right to speak in this House freely as the elected representative of the people in my Division, as well as one who had some technical knowledge of the points at issue? I speak, Sir, with great respect.

Mr. Speaker: I am afraid there must be some misunderstanding about this. In reply to the last question, I regret that, much as I wished, I was not able to call everyone. As regards the hon. Member for Rugby (Mr. W. J. Brown), I am afraid that I thought that he, as an old Member, knew the Rules better than he appears to have done, and for that reason I said that if it had not been so late I would have asked him to withdraw from the Chamber. I thought he knew that he must have been offending on at least four counts by rising on a point of Order and by protesting against the Closure, the set purpose of which was obviously to get on with the vote which I had been instructed by the House to put. There was no object then in asking the hon. Member to withdraw from the Chamber, because other-


wise there would have been no penalty. He would just have gone out and missed the vote; that would have been all. But had it been earlier, of course, he would have left the actual precincts for the whole of the day.
It was an offence on four separate counts. In the first place the hon. Member was challenging a vote of the House which had just been taken, and by which he is bound just as much as any other Member who voted. We are bound by the majority vote of the House. Secondly, he was casting a reflection on the vote of the House, which he cannot do except by substantive Motion. Thirdly, he was reflecting on the conduct of the Speaker, which again is out of Order and cannot be done except by substantive Motion. Lastly, it is clearly laid down—and this is in answer to both hon. Members—that reflections on the action taken by the Speaker, the Chairman of Ways and Means, or the House, on a Closure Motion, are not permitted. Nothing can be more definite than that. If the hon. Member had any grievance to raise, that was not the time to do it. He rather insisted in rising to a point of Order, which is one of the reasons I objected so strongly, seeing that I had been asked by the House to proceed forthwith to put the Question. If he had wanted to raise the matter, he should have done so after the second Division had been taken.
I am sorry about this misunderstanding. I had no feeling in the matter, but I thought I had better explain the matter quite clearly, and I have no doubt that the hon. Member for Rugby will acquaint himself with the Rules.

Mr. Brown: I appreciate now that I was out of Order in raising that matter in that way at that point. I regret that very much, and I am very grateful, Mr. Speaker, for what you have said about it.

Mr. Bowles: Further to that, both the hon. Members who have spoken this morning seemed to assume they had a right to speak because they had written indicating that they wanted to speak. [Interruption.] The hon. Gentleman the Member for Ashford (Mr. E. P. Smith) said he had written. I think there is growing up a tendency on the part of hon. Members to think that if they write

to Mr. Speaker or to the Chairman they have, for some reason or other—particularly if they are early in writing—a right to take part in a Debate. I was wondering whether at some time it might not be convenient, Mr. Speaker, for you to indicate that an hon. Member who writes and says he would like to speak in a Debate will not be favoured more than hon. Members who remain in their places throughout the Debate and try, in the normal way, to catch your eye.

Mr. Speaker: I entirely agree with the hon. Gentleman the Member for Nuneaton (Mr. Bowles). The practice of hon. Members writing is merely for the convenience of the Chair, so that it is known who wants to speak. It does not give any right whatsoever. After all, it is the duty of the Chair to look round to see who he thinks would best contribute to the Debate.

Sir John Mellor: Arising out of what you have said today, Mr. Speaker, although I admit you confirm what you said on a recent previous occasion in relation to something I said, when I complained of the Closure having been moved—when you said that my having complained after you had accepted the Closure was a reflection on the Chair—I would like, with your permission, to put this point. It has always been quite a tradition in this House that when the Closure is moved and accepted, hon. Members who object shout "Gag." I would submit that the exercise of that traditional privilege on the part of the Opposition is no less a reflection upon the Chair than the words I used the other night, when I said that the Closure had been "disgracefully moved." You then called me to Order and ordered me to withdraw my statement, on the ground that I had reflected upon the Chair, whereupon I did so. I submit that I was no more out of Order than other hon. Members who did at the time shout, "Gag".

Mr. Speaker: The answer to that is that it has always been the custom of the House that those who are aggrieved shout "Gag," or something of that sort. They are not shouting against the Chair; they are shouting against the Whip, or whoever moves the Closure. Therefore, there is nothing in that that is disrespectful to the Chair.

Sir J. Mellor: Further to that point, Mr. Speaker, I trust that last week I made it very clear, in express terms, that I was only criticising the moving of the Closure. I said that the Closure had been disgracefully moved. I certainly never meant to suggest that that applied to its acceptance.

Mr. Henderson Stewart: With regard to your previous Ruling, Mr. Speaker, on the general point, you will recollect that you said that you sought to call on speakers who could—I think your words were—"best contribute to the Debate." No doubt that is one of the considerations, but I hope you do not rule out of account the consideration that small minorities of certain parties in the House have sometimes, if not a right, at any rate a claim to be called upon to contribute, just because they represent small minorities of the House.

Mr. Speaker: The Speaker, the Chairman or whoever may be in the Chair has to take all these considerations into account.

BILL PRESENTED

ISLE OF MAN (CUSTOMS) (No. 2) BILL,

"to amend the law with respect to customs in the Isle of Man," presented by Mr. Glenvil Hall; to be read a Second time upon Monday next, and to be printed. [Bill 146.]

PRIVILEGE (POSTER)

11.16 a.m.

The Lord President of the Council (Mr. Herbert Morrison): I am exceedingly sorry to trouble the House again with regard to the matter of Privilege which arose after Questions yesterday. I am advised that the Motion which was carried is not, in itself, complete, and that, therefore, it is desirable for the House to resolve,
That the matter of complaint made yesterday by Mr. John Freeman be referred to the Committee of Privileges.
I am sorry to bother the House again, but I hope the House will agree that this Motion be adopted. I beg to move.

Mr. Oliver Stanley: Of course, we accept this Motion. However, we think that in moving it the Lord President might have included some apology to the hon. and learned Gentleman the Member for the Combined English Universities (Mr. Henry Strauss) who, during the short Debate upon the Motion yesterday, raised exactly this point, pointing out that it was in an unusual form; and asking whether it would not, in fact, have the limitation which the Lord President now fears. I hope perhaps it will be a lesson to the Lord President, that it is sometimes worth listening to comments that are made, even from the Opposition. It might have saved him from having to come to the House again on this point, which yesterday he treated with such importance, and which I cannot help thinking, therefore, he had spent some time preparing. He has now had to admit that my hon. and learned Friend was perfectly correct in the point of criticism which he raised.

Mr. Morrison: I cannot blame the right hon. Gentleman for making the comment he has made, which has obviously given him some pleasure. I have said that I am sorry to have to bother the House again, and I am sorry. I am sorry also that we were not complete in the proceedings yesterday. The House will recall that there was a certain amount of excitement when this matter arose yesterday, and a good deal of feeling. I was watching the Debate very closely, and listening with great interest to the Leader of the Opposition, who, unexpectedly, made a speech of substance. There was a good deal of feeling on this subject, and the consequence was the Motion that was carried was not entirely complete. Therefore, I have taken—I hope courteously, and with respect to the House—the earliest opportunity of putting it right. In the circumstances, I trust the House will be good enough to agree to the Motion which I have moved.

Question put, and agreed to.

Resolved:
That the matter of complaint made yesterday by Mr. John Freeman be referred to the Committee of Privileges.

Orders of the Day — FINANCE (No. 2) BILL

Order for Third Reading read.

11.20 a.m.

The Chancellor of the Exchequer (Mr. Dalton): I beg to move, "That the Bill be now read the Third time."
We come now to the last stage in the proceedings on the second Finance Bill of this Session. The matters in the Bill have been much debated and a little amended in the course of our proceedings, and I am not going to make a long or detailed speech, but it may be useful for the House just to take a last look at the main provisions of the Bill as amended in Committee and on Report. This is the first Bill for some time—I unite with it, for the purpose of this observation, the Autumn Finance Bill, as many of the reliefs given under that Bill only came into operation as from April—when it has been possible to give a substantial relief in taxation. The relief has been substantial, as I will briefly indicate. There may be discussion as to whether the relief might not have been given more to one person and less to another, more to one section and less to another, or more on one group of articles and less on another, but although that may be argued, the net effect is a very substantial relief of taxation.
In this Bill a relief of Entertainments Duty has been proposed, with reduced scales for football, cricket, tennis and all other outdoor sports, except horse, motor and dog racing, and in Committee we have also brought regattas within the field of the reduced duty. I think this change has been generally welcomed. There has been a little debate as to how much of the relief should be passed on by the clubs to the spectators, and most clubs have played the game with regard to that, but some have not and we shall have to keep a watchful eye on the practice, particularly on Scottish football fields, between now and the next Budget. There are ways by which I could make them do what they will not do voluntarily; I am leaving it for the moment to them, and I hope that the Scottish Football League, which is being a little recalcitrant and is maintaining the price of entry at is. 6d., will see fit to follow the good lead given them by

the clubs South of the Border and reduce it to is. 3d. If they do not, I give them warning that I shall exercise my ingenuity in the next Finance Bill to make them do what the others have done.
So much for entertainments. I will now turn to Purchase Tax. We have had a large number of changes there, a long list of exemptions and reductions, some proposed originally by me and others adopted during Committee and Report stages. The final catalogue of total reliefs and reductions will give considerable benefit, very widely diffused over the community, particularly, I am glad to think, to the housewives. Perhaps I might very briefly run over some of the main heads, including the autumn Finance Bill, in regard to which exemptions and reductions have been made in Purchase Tax. Last October we exempted stoves, gas and electric fines, cooking rings, domestic boilers and refrigerators from the tax. In this Finance Bill we are wholly exempting pots and pans, dressers and other kitchen furniture, electric kettles, utility blankets, spring mattresses, irons of all kinds, electric or other, fire guards and many other useful objects in the home.
In addition to this we have reduced the tax on a wide range of articles: silk goods, musical instruments, garden furniture, have all had substantial reductions, and wallpaper also, and we have given complete exemption to office machinery, sailing vessels—this is a miscellaneous list—miners' lamps, electric batteries used in deaf aids, and electric batteries not so used, as we could not distinguish the purpose to which a battery was to be put, and last but not least wigs, and vermin traps, including mole traps; the hon. Member was particularly anxious that moles should be included, and I was glad to assure him that they are. As regards slug traps, we deferred a final decision, but I am pretty sure that the slugs will be for it too. This is a mere selection from the list of benefits conferred, with the approval, I think, of all sections of the House, by His Majesty's Government on the taxpayer.
With regard to Customs and Excise, we have made, as I think, a useful provision in this Finance Bill whereby there is a rebate on the duty on artificial silk used in the manufacture of tyres, and I think that will give a stimulus of a valuable character not merely to the artificial silk


industry, which we all wish to assist as one of the liveliest specimens of private enterprise at present extant in this country, but also because it will assist the development of an important new factory in an area which in the past has suffered much from unemployment, namely, West Cumberland, in connection with the transformation of the Royal Ordnance Factory at Sellafield for the purpose Of this manufacture.
In the field of Inland Revenue, there have been large reductions in the Income Tax. I will not reopen the debate between direct and indirect taxation, except to repeat once more, because I am anxious that the House should not misunderstand what I am doing and what I think it is right to recommend them to do at this stage in our affairs, that I have come down heavily in favour of Income Tax reductions as compared with playing about with the duties on commodities. I have done a bit on commodities, as I have already indicated, but I am quite sure that what most people need, and what gives the greatest stimulus to incentive, so far as incentive is dulled and blunted and depressed by taxation, is to pay less Income Tax. That is what they want, less Income Tax. That is much more important than cutting the price of—whatever you like. It is much more of an incentive to have to pay out less money to the State, to have Income Tax reduced, than to get a comparable relief in a form in which one is hardly aware of it, namely, adjustments of prices.
I hope that in all parts of the House it will be felt that at this stage I am not laying down doctrines for eternity—no one but a fool does that—but I am saying that now, in this stage of our affairs and at this moment when tax relief is so necessary, it is important to give a high priority to reliefs of Income Tax. In the main field of Income Tax the reliefs have been given under a number of heads; putting the autumn Budget and this Budget together, we have had a cut of 1s. in the standard rate of tax from 10s. to 9s., we have had substantial increases of the personal allowances from go to £80 to £110 for the single person and from £140 to £180 for the married couple. Also there have been further reliefs by way of the earned income allowance being raised from one-tenth to one-eighth, as from the 1st October, but operating for the whole

year, with that wonderful autumn week in which everybody will be credited with the relief due for the six preceding months—and will put it all into savings certificates, as I am told. In addition, we have made an increase in the allowance for married women working, which we have raised from £80 to £110 a year and we have exempted all National Insurance contributions from Income Tax for the future, which will be a benefit increasingly appreciated as the contributions mount and as the National Insurance Bill, when it becomes an Act, comes successively into operation. That relief has been given this year, and in addition the first step has been taken in the repayment of Income Tax postwar credits, beginning with the old people of 65 years of age in the case of men, and 60, in the case of women.
As Members of the House know, the net effect of this group of Income Tax reliefs in the two Finance Bills is that no less than 2,500,000 persons who would have been liable to Income Tax will not now be liable. Two and a half million persons will be relieved from Income Tax liability and all the others will be relieved to some extent. On the other hand, there have been cases in which the House has agreed, on my proposition, to raise taxation, first, with regard to Surtax and secondly, with regard to the higher levels of Estate Duty. There have been debates and votes upon it, but it has seemed to the majority of the House to be fair that there should be some balancing here. In spite of the increases in the Surtax, which have not yet, of course, actually begun to operate owing to the year's time-lag, but which will operate in due course—in spite of that, every Surtaxpayer is better off than he was under the previous Government. The only grievance can be that he is not as better off as he thinks he is entitled to be; but that is a matter of opinion on which we have had debates. The net result is that we have gathered in prospectively an additional £7 million a year by increasing Surtax on the higher levels of income, to balance, in part, the substantial reliefs which Surtaxpayers, in common with everyone else, receive under the various heads I have enumerated.
The second case where there has been an increase in taxation is in the higher levels of Estate Duty; and this has to be set against the very substantial relief


which I have proposed and the House has agreed to, in the case of the smaller estates. As a result of this, 150,000 out of 200,000 estates in any year passing at death are exempt from Estate Duty. That, I think, will be of great benefit to a large number of people. With regard to gifts inter vivos, the House has agreed that we should extend the period to five years, except for charitable gifts, where we have decided to retain the period at one year, as it is now. These conclusions are slightly different from my original proposals, but it is an example of how discussion in Committee can help these things along.
Then there is E.P.T. People have almost forgotten the great boon conferred by this Government on the business world by the repeal, from the end of this year, of E.P.T. The hon. Member opposite who speaks with a combination of knowledge and charm, which I always appreciate, has not forgotten I am sure, my remarks on this subject. It is true, of course, that I said I did not know what I would do next year; but that is an honest statement, and it would be very silly of me now to say that I knew, when it clearly depends on what happens between now and then, the state of our financial affairs, the degree to which we approximate to a balanced budget, and so on. Nonetheless, a bird in the hand is worth a panic in the bush, and I should have thought it was of great advantage to the business world that E.P.T. is dying, and will be dead at the end of the year. To get it on record, I repeat again that I regard E.P.T. as a magnificent tax in wartime. You could not have a better instrument for taking the profit out of war, which does not have any long-term ill effects; but since the war has ended, it becomes a most unsuitable tax for peacetime service. I gave it a high priority in our plans for destruction, and we are destroying it.
We may, of course, think of some new and better way of raising some small sum of money from industry. We may or we may not; but all I promise here is continued mental activity and profound and prolonged reflection. And I can assure the hon. Member, who is an expert on these matters, and some of my hon. Friends who may perhaps have suggestions to make, that I shall be ready to listen to them. I was thinking of the Back

Benches, because the Front Benches have their own modes of approach through the usual channels. I was making a general invitation to hon. Members on the Back Benches on both sides to let me have any suggestions, which I promise I will look at, because this is a difficult question. We do not want anything like E.P.T., which has certain characteristic effects. It may be argued that it is better not to have any general tax on profits, but to let them fall into the general scheme of Income Tax. As I say, I promise an open and active mind between now and the next Finance Bill.
E.P.T. is going. Not only is it going, but we have a number of clauses, on which much thought and debate have been spent, for its winding up and for the transitional arrangements. It would be tedious to enumerate them in any detail, as they have been discussed at great length, and many of them are very technical. I am grateful, however, to Members who have contributed to these discussions, where expert knowledge is of great value.
Perhaps I may mention three or Jour Amendments which have been accepted, to the improvement of the arrangements as a whole. Firstly, there is the question of terminal expenses, where we have agreed to extend the time limit to the end of 1949. I hope that we can bring the thing to an early conclusion, because one of the worst things that happened after the last war was the dragging on of the Excess Profits Duty. We want to close it down as quickly as we can, and I hope there will be no need for any further extensions beyond 1949. Secondly, on cancellation costs, such costs, when contracts are terminated, will rank as terminal expenses. Thirdly, regarding capital rehabilitation costs, those costs if incurred before the end of 1946 are to be allowed for E.P.T. Finally, where assets are replaced instead of being repaired, deferred repairs relief is nevertheless to be given. These concessions to industry will, I hope, be used by industry in keeping with the purposes put forward in the Debates, as a means to building up our resources, improving our equipment, and strengthening our productive capacity generally. They are not intended as a pourboire for shareholders, but to enable industry to prove that it can do its job.
The total effect of all these tax concessions which I have been summarizing


amounts to the formidable figure of over £500 million a year. Taking into account the additional revenue we shall receive, the reliefs amount to over £500 million a year, a very substantial figure, as I said during Committee stage. I take credit for it as a Member of the Government, and as a Member of this House, who has cooperated in passing this Measure. Let no one run about the country and say that this Government is not relieving the burden of taxation, because that would be grossly untrue. We have reduced it by more than £500 million in less than 12 months of office. Everybody has benefitted to some degree. Nowhere can anyone put his finger on a taxpayer and say, "This man is worse off as a result of the Labour Government coming into office." They are all better off, in varying degrees.

Mr. I. J. Pitman: No.

Mr. Dalton: I know the hon. Member's case of the Surtax payer with ten children, and if I did not know it the hon. Member has submitted it to me before.

Mr. Pitman: Mr. Pitman rose——

Mr. Dalton: No, I must get on. If the hon. Gentleman wants to make a point, he will have to compete with others for your favour, Mr. Speaker. As I said, there is no taxpayer anywhere in the whole country who is in any way worse off now. He may be worse off in the sense that he has lost his job, but that is a different point altogether. From the point of view of taxation, every taxpayer finds himself better off today than a year ago. If the hon. Member for Bath (Mr. Pitman) disagrees with me, he can pursue the argument later.
I hope this is only the first stage of a continuing process of tax reduction, and and that in the years lying immediately ahead further reliefs, widely distributed, will be given. That depends on many factors which it would be out of Order to discuss now. Nonetheless, I am not downhearted at the general picture, so far as the future is concerned. I think the reconversion of industry has gone surprisingly well, better than most of us thought. Unemployment, although too great, particularly in two or three difficult areas, in regard to which special measures must be taken, is surprisingly low when

we think of the fears entertained of mass unemployment through the transition from war to peace.

Major Bruce: Better than after the last war.

Mr. Dalton: I am not attempting to draw any comparison between now and after the last war, but I think we have learned a lot of lessons from what happened immediately after the last war. A great number of errors made than have been successfully avoided, but we should be a poor lot of people if we did not learn something from the things which went wrong at the end of the last war. Exports are going on pretty well, goods are appearing in the shops in increasing quantities and people, I hope, will continue to save their money, particularly after the holidays. I am inclined to be reasonably human. I am sure we all agree that it is very natural for the people to want to enjoy themselves after six years of war. It is very natural that people should want to take holidays and should want to replenish their stocks of household goods as increasing supplies become available. Therefore I do not take it as tragically as some people that, for the moment, there is a definite sag in the total of savings by the broad body of our citizens as evidenced in the cashment of Savings Certificates and the withdrawals from post offices and trustee savings banks. A lot of money is going in, but a lot more is coming out. [An HON. MEMBER: "Yes, more."] Yes, I think for the moment more for the reasons I have given. I think the test will come in the autumn when the people have had their holidays and there will be further tax reliefs. I shall be disappointed if we do not find a resurgence in the volume of national savings. I have been in touch with the admirable body of people who organise savings campaigns, like Sir Harold Mackintosh, and plans are now in process of being prepared for a big stimulation for the Savings Movement in the autumn.
If I may I should like to close on a personal note. We have had extremely good personal relations on the proceedings throughout this Bill. There may be other subjects which raise fierce passions for the moment, but on this Bill we have had an unemotional and easy passage. It has all gone along very happily and very seldom had we to move the Closure. We put up with two all night Sittings with


great philosophical good humour, I think, and some of the best speeches were made in the early morning. In fact, as time went on the speeches steadily improved. I should like to thank all those who contributed to it in all parts of the House and, in particular, to those of my hon. Friends who assisted me by holding up my arms if they tended to droop—the Financial Secretary to the Treasury and my hon. and learned Friend the Solicitor-General. I did tell the Solicitor-General once or twice that I thought he was going into more detail than the Opposition really wanted to hear. I was trying to judge the feelings of the Opposition, and I was not sure that they really wanted to know quite the whole thing. Nonetheless, he proceeded, in spite of that suggestion I made, in delivering a very thorough course in adult education. Hon. Members in all parts of the House will have greatly benefitted, and we all know much more than we did a few weeks ago. Those two hon. Friends played a most valuable part in the passage of the Bill, and all that remains now for me to do is to hope that the House will see that the Bill will soon be read the Third time.

11.47 a.m.

Sir Stanley Holmes: We have just listened to the Chancellor summing up the provisions which he has made in the Finance Bill which is now finishing its consideration in this House, but in all he said there was one particular thing which he failed to refer to and which I think should be mentioned. By his Budget, the consequence of which is this Finance Bill, he is raising £3,000 million from taxation. What I want to point out is that more than two-thirds of that is the result of the efforts of private enterprise. We are rather inclined, I think, in these days to be oversaturated with talk concerning nationalisation, and to make people think that the affairs of the nation are being run by that particular system, but, as a matter of fact, the only progress that has been made in regard to nationalisation so far has been nationalisation of the Bank of England, which was really implementing the custom which has existed for so many years, and nationalisation of the coal industry, which I should think, so far as this Bill is concerned, is going to cost the Chancellor more money rather than give him revenue.
The fact remains that the Chancellor is dependent upon private enterprise for the

revenue he expects to get as a result of this Bill, and I think one may go further and say that the country is also dependent for its recovery from the wastage of war upon private enterprise. Reference has recently been made by the Lord President of the Council in a broadcast to the remarkable increase in exports and, he, in effect, paid a compliment to private enterprse for this. It is private enterprise that supplies——

Mr. Speaker: On the Third Reading of the Finance Bill one cannot have a Debate as to the merits of private enterprise or State enterprise. One has to stick to what is in the Bill.

Sir S. Holmes: What I was going to say, Mr. Speaker, was that it is private enterprise that is supplying to the Chancellor the whole of his Excess Profits Tax, his National Defence Contribution, most of his Income Tax and almost all his Surtax which he expects to get under this Bill. Therefore, having regard to the fact that private enterprise is contributing so largely to the revenue which the right hon. Gentleman requires, surely the industrialists of the country have a right to know where they stand in regard to future taxation.
The Chancellor is, naturally, planning ahead for two or three years. In the same way, industrialists have to plan ahead for two or three years and, that being so, the right hon. Gentleman must allow the chief contributors to his revenue to have the information necessary to allow them so to do. I hope I may point out that our industrialists are not engaged in internecine war; they are fighting, on our behalf, against their opposite numbers in America, Latin America, and other countries all over the world. What they want is a sense of security, particularly in regard to taxation, and they have a right to ask the Chancellor to give it to them so that they can develop their trade with due knowledge of the right hon. Gentleman's intentions, and without fear that he will spring something upon them.
I now come to a point which the Chancellor made in his speech this morning. I agree that he has given considerable help to industrialists by withdrawing the Excess Profits Tax as from 31st December this year, but he still talks about a new tax that he may have to put on next April. He said that first in his Budget speech, but a lot has happened since then.


Three and a half months of the new financial year have passed, and he must now have a better idea of what will happen to the revenue he is planning to get by this Bill. Let me remind the House that when the right hon. Gentleman made his Budget speech we did not know whether the American Loan would be ratified, and the fact that it has now been ratified will surely make a great deal of difference to the right hon. Gentleman's revenue. Many of the dubieties that were in his mind when he made his Budget speech in April must have already disappeared, and I hope that instead of merely making a threat of a further tax he will give his chief contributors to the Revenue a little more information of what he intends to do next April. The right hon. Gentleman also said that he is keeping his eye on increased dividends, and that he may have to do something about this matter. I do not know to what extent that will affect his revenue during the current year, but I think his revenue will be increased by the payment of increased dividends, because in that way money which will otherwise only come in under Income Tax will come in under Surtax. I am sorry that the right hon. Gentleman, having made that statement concerning dividends in his Budget speech, has not seen fit to explain to industrialists that if they follow his advice—almost instructions—to plough back money into the business, to provide all the equipment necessary, and develop their trade in a satisfactory way, he will have no objection to increased dividends.
Another point I want to refer to is the provision in the Bill with regard to Purchase Tax. This is the first Finance Bill in which Purchase Tax has been abolished in some cases and reduced in others. The effect of that is to cause a considerable amount of injustice to retail traders. It comes about in this way: Purchase Tax is collected by the Revenue from either the manufacturer or the wholesaler. The retailer pays his tax, which he subsequently charges to the public, to the manufacturer or wholesaler, as the case may be. When the Chancellor takes the tax off any article a retailer who has any of those articles in his shop has to bear the loss himself. He cannot recover the tax he has previously paid.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): He can sell it at a

price which includes the tax he has had to pay on it. He bears no loss whatever.

Sir S. Holmes: That is true, but I will put it to the House in this way: Suppose there is an article for which a housewife, before Purchase Tax was put on, paid 5s. Then Purchase Tax is put on, and the cost of the article is 7s. 6d. Then Purchase Tax is taken off, whereupon the housewife will immediately say, "I want this article for 55." Many shops would take off the tax straight away, but there are others who will say, "The Financial Secretary says that I can charge 7s. 6d.," and where does he stand? Not only would the shopkeeper be unable to sell the article at 7s. 6d., but he would lose the goodwill of the public, who would think he was cheating in attempting so to do. The effect is that the retailer loses in practically every case. So far, that has had little effect, because goods in the shops are in short supply, but, in future, Purchase Tax will be taken off goods that are in full supply, and which are largely stocked by all retailers. I want to remind the Chancellor that the effect of this will be that, before the Budget is introduced next April, every shopkeeper who thinks he has something in stock from which Purchase Tax may be removed will run that stock down in order to hold as little as possible of it, and not to be caught by the lifting of Purchase Tax from that particular article. This will affect the Chancellor's revenue at the end of the current financial year. The same thing will happen every year as long as the Purchase Tax remains.
Traders will cut down their stocks before the Budget date. They will not stock up again immediately after the Budget, because of what has happened in this Budget. The main concessions with regard to Purchase Tax were given in the Committee stage, and not in the original Budget. If that happens every year, from April until we come to the Third Reading of the Bill in July retailers will refuse to stock up with any article that still bears Purchase Tax. The public will be incensed and annoyed, because they will continually go to shops to buy certain things which are usually in common supply and they will be told that there are none in stock. This will affect the Revenue, not only this year, but every year so long as Purchase Tax remains, and therefore, I hope that on


reconsideration of this matter the Chancellor will see the wisdom of giving back to the retailer what will not be a considerable sum on Purchase Tax that he has already paid on articles which he has in stock at the time Purchase Tax is taken off.

12.2 p.m.

Lieut.-Commander Gurney Braithwaite: I am sure that all hon. Members, despite their differences, will unite in congratulating the right hon. Gentleman the Chancellor of the Exchequer upon reaching the end of the long pilgrimage upon which we set out together on 9th April. I would like to associate myself, and I am sure my hon. Friends, with the congratulatory remarks that have been made regarding the Financial Secretary, upon whose lucidity I had the honour to congratulate him only the other evening. May I say how much I regret the absence of the hon. and learned Gentleman the Solicitor-General, because I would have liked him to hear me say how sincerely we appreciated the many interventions which he made on abstruse matters, which have succeeded in placing upon our records I will not say judgments, but at least advice that will be of great benefit to those who will interpret in the courts the meaning of the complicated legalistic phrases with which this. Bill abounds.
On Second Reading the Chancellor jibed at us because we thought it proper to divide the House. He told us that we were voting against a long list of benefits; but had we allowed the Second Reading to go unopposed, the Opposition would have declared themselves satisfied with the Bill as then drafted. During the Committee stage, the blacksmiths have been at work and the hammer men have put in long hours on the Bill. Week in and week out, from morn till night, and sometimes all night, one could hear, almost literally, our bellows roar. The result has been a number of improvements, many of them within the ambit of the Purchase Tax, ranging from wigs to wallpaper, from sailing yachts to flatirons. Many and great improvements have been made. The Committee and Report stages have added to this Bill a number of valuable concessions. The Measure is now considerably improved, embracing as it does additional tax reductions; and in view of this, it is not the intention of

the Opposition to divide the House against the Third Reading of the Bill. Such are the results of patient work,
The Lord President of the Council, when announcing the Business of the week the other day, thought it proper to remark that he thought that progress on the Finance Bill had been on the "leisurely side." I think we ought to remind ourselves, quite seriously, that the Finance Bill is always the premier business of the Session, if one excludes the Debate on the Address, and that it is the duty of the House to scrutinise taxation and expenditure proposals with meticulous re. For that reason, I much prefer the verdict of the Chancellor of the Exchequer, delivered in the small hours of one morning, when he said that we had all done well and some, indeed, had received prizes. Research into our past records shows that the passage of this year's Finance Bill has not been prolonged beyond the normal period, and House of Commons procedure has been justified up to the hilt. I say to hon. Members in all parts of the House, particularly those on the Back Benches: Let us resist any temptation coming from the Leader of the House, who, after all, has not shared our labours, to scamp this detailed and essential, if somewhat irksome, task in future years.
This is the occasion, the Third Reading of the Bill, to count our blessings. We acknowledge gratefully from these Benches the payment of postwar credits to certain sections of the community, although I am opposed to the discrimination against my sex in which the Chancellor thought proper to indulge; the relief of Entertainments Duty upon sport; the wide reductions in Purchase Tax; the relief of small estates from Death Duties; and the forthcoming abolition of the Excess Profits Tax. All these are blessings which we can count, all of them are reasons for not dividing on the Third Reading of this Bill. But this Finance Bill is, after all, erected on the foundation of the Budget introduced last April, and in that Budget was written, as the Chancellor told a great meeting at the Albert Hall and subsequently told us here, £520 million which he anticipates will come from the Savings Movement. In the concluding part of his Budget speech, the right hon. Gentleman referred to his anticipation under this heading, and I would like to say a word about it, because this is the main defence against inflation.
This Bill is deliberately and rightly framed with that primary objective. Mention of it has cropped up over and over again during our long deliberations in Committee. When we have urged this and that concession, the anti-inflation argument has been adduced over and over again. I suggest to the right hon. Gentleman that, since the introduction of the Budget last April, this anti-inflationary weapon has become somewhat blunted. There are some disquieting signs. The raising of railway fares, just when people are going away on well-deserved holidays, the application of the London Passenger Transport Board for increased fares, the rise in the price of utility clothing, particularly for children, coal, the recent announcement of revised agricultural prices which, last Friday, the Minister of Agriculture told us would be carried in toto by the Exchequer, adding some £11 million to the cost-of-living subsidies. All those are matters which indicate that the anti-inflationary weapon is becoming somewhat blunted. It may have been for that reason that the Financial Secretary went "on the air" the other night. He delivered a broadcast in what I thought to be somewhat querulous tones on the subject of withdrawals and encashments. I listened to the hon. Gentleman with care at my own fireside, as indeed I listen to him in this House, and at the conclusion of his remarks one of the company said, "That is the sort of speech which, in America today and in this country in the old days, might well have started a run on a bank. When the bank manager or his assistant assures the people that the money is safe and asks them not to draw it out, it does not seem to me a very wise thing to put this out over the air.
I want to suggest to the Government that the withdrawals are not entirely due to the reason given by the right hon. Gentleman, important as it is. I am one who is going to draw on my capital for a holiday when the Recess comes; I make no apology, for we have all earned a holiday, but I suggest that these withdrawals are much more directly due to the fall in the purchasing value of the pound—the increased cost of living which is slowly making itself felt upon us. I want to repeat the remark I made in the Budget Debate in April, which was not so much a remark as a direct question. I put it

to the Government then, and I put it again now—although the right hon. Gentleman did not think it proper to reply then he may have had a good reason—is it still the intention of the Government to repay the people's savings in paper money of approximately the same value as at the time it was lent? That is fundamental, because if the Government are going to ask people who are to draw various benefits in October to lend them, those people are at least entitled to some assurance on that matter. We are slipping in this matter of inflation and I myself doubt whether the American Loan will help us to curb this tendency.
I mention that because, of course, the right hon. Gentleman must already be looking to the future. No sooner is one Finance Bill read the Third time than the Chancellor has to be thinking of next April, and I am sure no one is more likely to do this than he. The right hon. Gentleman has told us that he is working on a long-term policy—I think he called it a five-year plan. He told us in April that we were within striking distance of a balanced Budget. We may have a balanced Budget, if we want it, quite soon; at present we have an unbalanced Budget but we are in control of the situation. Again, I would ask a question, and perhaps the Financial Secretary will be good enough to answer when he comes to reply. What sort of a balance? Is it to be on the basis of a peacetime level of expenditure and wartime level of taxation? Is that the balance with which we are faced quite soon?
The right hon. Gentleman took pride just now in the fact that under this Labour Government very large reductions of taxation had been made. It would be a very grievous charge had nothing of the kind been done after the end of the longest war in which we have ever been engaged. Surely, any Government worthy of the name would have effected some taxation reductions in the first postwar Budget? But if we are to continue with taxation at approximately the level we have voted in this Finance Bill, I would say that anyone could achieve a balanced Budget by that method. Any elementary schoolboy could do it given peacetime expenditure and wartime taxation, but to maintain taxation on the present stultifying level leaves no margin at all for any extraordinary expenditure which might arise in the event of some


future catastrophe or emergency. It is for that reason that I cannot regard the present financial position as satisfactory—indeed, I regard it as illusory. The sellers' market which we have today is causing us to live in a fool's paradise so far as our national finances are concerned, and I want to suggest to the right hon. Gentleman that much stronger action will be required to prevent the nation sliding further down the inflationary slope. I have to offer my apologies to the Chancellor and to the Financial Secretary for the fact that a very long standing constituency engagement makes it impossible for me to be here when the reply is made, but I shall read with interest any darts that are fired or any criticisms that are made of my remarks.
I now turn to poetry for my peroration. I have found some words of comfort in the works of the poet Gray, not from the famous Elegy so often quoted, but from another poem which issued from his pen, and far more suitable, I think, to our present situation and to the present holder of the high office of Chancellor of the Exchequer. I take the quotation from lines inspired by a distant prospect of Eton College:
Alas, regardless of their doom,
The little victims play!
No sense have they of ills to come
Nor care beyond to-day.
Yet see how all around them wait
The Ministers of human fate
And black Misfortune's baleful train!
Ah! chew them where in ambush stand
To seize their prey, the murderous band!

12.16 p.m.

Mr. James Callaghan: I do not think that the hon. and gallant Gentleman the Member for Holderness (Lieut.-Commander Braithwaite) is quite the person to read such lines. His cheerful and benign countenance makes mockery of such dismal words. He should have left it to one of the more cadaverous Members on the opposite side of the House, who would have been able to give appropriate expression to those gloomy portents. The hon. Member for Orpington (Sir W. Smithers), whom I see sitting on the back row regarding us with his customary benevolence, would have been able to put much more feeling into those words than could the hon. and gallant Member for Holderness.
The Budget which the Chancellor launched three months ago, the craft which he launched upon the perilous Par-

liamentary seas, is now within sight of harbour. It lay becalmed during a couple of long nights when the wind seemed to drop, but, generally speaking, the Chancellor has kept such a firm hand on the tiller and steered such a true course that the crew on both sides have been able to bring the ship near to port during these long two or three months. It is, indeed, difficult to find something fresh to say about these proposals, which have been debated at such great length and in such detail during the last few months, but there are one or two observations which I would offer to the House on this Third Reading without, I trust, getting out of Order, I think that part of the speech of the hon. Member for Harwich (Sir S. Holmes) was answered by that of the hon. and gallant Member for Holderness. I refer to the plea made by the hon. Member for Harwich that the Chancellor should say that he has no objection to increased dividends during the next 12 months. As I have said to the House before, I think the Chancellor was right in uttering the warning of the possible necessity of reimposing the tax next year. Let us not forget that we had to reimpose the tax after the last war when we had dropped E.P.T. for 12 months.

Sir S. Holmes: It is true that I asked the Chancellor if he would allow increased dividends, but I did say if the company in question had already provided all the money for re-equipment and putting its works in order.

Mr. Callaghan: I am grateful to the hon. Member for reminding me of that point, but I was about to develop my argument in relation to what he has said. The hon. and gallant Member for Holderness said that he thought the anti-inflationary weapon had become blunted, but, whatever views one holds, if, in fact, that is true, one of the surest ways 'of blunting the instrument is for the workpeople of this country to know that increased dividends are being paid. It does not matter if the company has done its duty in replacing the machinery and rehabilitating its works in accordance with the repayment of E.P.T. to which it is entitled, I only say—and I am certain that this is right—that it is psychologically bad for the workpeople to feel that increased dividends are being paid out by a company at a time when they are being asked to hold their wages steady. I think it would be bad if companies did indulge


in this during the next 12 months, when, if the hon. and gallant Member for Holderness is right, fears that inflation will rather grow may be realised during the next few months. It would be most unfortunate if we were to witness a galaxy of shareholders meeting to pass themselves increased dividends. I do not want to get into the realm of party politics, but I want to say that it is not the shareholders who are putting the effort into the concern, and it is for that reason that I hope, and I am sure I have no need to urge this on the Chancellor, that the right hon. Gentleman will not give any such assurance. It would be in the highest degree unfortunate if we were to witness a substantial increase in dividends during the next 12 months.
The hon. and gallant Member for Holderness rather rebuked the Lord President for saying that the process of this Budget had been inflationary. The right hon. Gentleman did not say that. What he said, and I have refreshed my memory from HANSARD, was that the procedure of the Finance Bill was inflationary, which is entirely a different matter, and one on which many hon. Members on both sides of the House hold views. I do not want to get out of order, because I see your eye on me, Mr. Speaker, but I think there is a case for reviewing the matter, as the Lord President said, and I think this was the gravamen of his com plaint—that there was some case for reviewing some of these processes in order to see whether we can avoid saying the same things too many times in these long Debates which take place. I do not want to refer to any hon. Member, because we have been very friendly this morning.
There are one or two Clauses in the Bill to which I would like to make reference. The general provisions on E.P.T., as I think the hon. Member for Edgbaston (Sir P. Bennett) will agree, are sensible and workmanlike, but the real test of how workmanlike they are will come when we start to work them out. Generally speaking, we do seem to have profited from the experience of the last war, although one might hope for a closer definition of some of the terms—for example, who is to define the word "stock," and all that it implies, which will certainly need a great deal of forensic ability, for which the inspectors of taxes are renowned, to make certain that the

Revenue and the taxpayer get a fair deal on these important issues. I think that both the Inland Revenue and the accountants are going to be faced with a very difficult task in translating these provisions into action, but they will do their best to effect a sensible and workmanlike method.
I am not so happy about Clause 28. I ventured some observations on this Clause in an earlier stage during a heated Debate one evening. I fear that we have not closed the gap. We have, undoubtedly, closed a part of the gap, but Gladstone did say that the ingenuity of the taxpayer and his advisers could always outrun the ingenuity of the Revenue and the Exchequer in stopping up the gaps. From the information I get, already it seems possible that Clause 28 may not be as effective as we thought when we drafted it. I hope that the Chancellor will ask the Board of Inland Revenue to let him have a regular report during the years on how these settlements are going. Let the right hon. Gentleman watch the process, and let us see whether anybody is getting through the network which this House, by a substantial majority, decided should he stopped up, because I fear there are ways and means of evading what we were, quite properly, trying to do.
There is one word I want to say in connection with Clause 64 which I do not think has been said in this Debate, and that concerns the charge on the National Debt. I do not think the Chancellor has taken enough credit to himself, or the preceding Chancellors, for the way in which our National Debt has been managed. It is a fact that the charge on the National Debt, the interest that we are paving, has just about doubled itself between 1938 and 1945. That is due, of course, to its management by the preceding Chancellors, and also to the management of my right hon. Friend during the period of 12 months in which he has been in office. When one recalls that the national income has itself pretty well doubled during the war, and that despite the vast increase in the expenditure of the nation in unproductive armaments during the war which has taken place, amounting to many thousands of millions of pounds, one realises that the increase in the charge on the National Debt has only kept pace with the increase in the national income. That is an achievement of which this country


can rightly be proud, and it is something for which the Chancellor may take a great deal of credit.
As is known in the House, I am assistant secretary to the Inland Revenue staff, and, although I do not do any active work on their behalf, I do take a very friendly interest in their welfare. The Chancellor has made great strides in his relations with the staff. He has got on more friendly terms with them than any previous Chancellor I have known. He has given them great encouragement in his utterances about their accommodation and the conditions in which they work, and they are most grateful to him. I feel that the House would like to know that the Inland Revenue staff held their conference a month ago, when they sent a message to the Chancellor offering to co-operate with the official side of the Board of Inland Revenue in seeing in what way the heavy arrears of work, from which the Department is suffering, can be overtaken. We are trade unionists, reaffiliated to the Trade Union Congress on the day on which the Royal Assent was given to the Bill making that possible, and we were very glad to do it. We think it is one of the functions of modern trade unionism that we should offer to co-operate in this way in a public service in trying to overtake these terrible arrears that have fallen on the Inland Revenue through, I think, no fault of their own. The Chancellor gave us a most courteous and felicitous reply to our message, and committees are at work at the present time to see how these arrears can be overtaken.
But we are trade unionists, and there is a little matter of an increase in pay. I see that I am getting out of Order, but I do want to say, and I think I should be in order in saying it, that one of the best ways in which we can get this Finance Bill into operation is by making sure that the staff feel that they have had a square deal. It is as important for the Inland Revenue staff as it is for the Government. I will not pursue the point further now, though it is important to say that we are going to be lucky if we get through this work this year. I do not know whether the House realises the effect of these provisions on the people who have to work them out. There are big changes this year, and they will require some effort, and I think the House ought to realise, when it passes legislation, the great burdens which fall on the people who

have to translate what we do into action. I congratulate the Chancellor over all on his Budget. I think we have all been delighted to see that Clauses 48 to 51, which set up the National Land Fund, have borne fruit so soon. It is most encouraging to find that Bala has fallen into the laps of the nation, and I hope that will encourage others to do the same and that these Clauses will not become a dead letter.
Finally, on the Death Duties, there again I think it is a commentary on the intellectual lethargy of the Chancellor's predecessors that no Chancellor apparently ever discovered how, or thought it worth while, to except 75 per cent. of the people who died and yet manage to raise the same revenue from the remainder. That has been an achievement of which again one can be proud. This Budget is a good Budget. On the whole I believe it has done the right thing. I do not agree with all the Chancellor has done but, on the whole, there is no doubt that it is an excellent Budget and is the procursor, I am sure, of many other excellent Budgets.

12.32 p.m.

Sir Peter Bennett: I should be out of Order if I followed the hon. Member for South Cardiff (Mr. Callaghan) into the question of the relationship of wages to dividends, so I will reserve that for another occasion, beyond pointing out to him that when he states that the worker feels he ought to have the return, not the shareholder, would he please bear in mind that the buildings and the plant do not grow up of themselves, though they are expected to be there? You do not get something for nothing in this world and, therefore, we must have a return. So do not grudge the man his return for having provided the facilities. As a fair minded man, I thought, Mr. Speaker, that you would allow me to say that without going further into the question.
I am always surprised when I come back to this House after a Recess, at the procedure by which we try to make progress by emphasising our differences, for I have been trained in a different school. However, I always feel that a Third Reading Debate allows us to take a rather broader view and see where we agree as well as where we differ. On the present occasion, I think we can congratulate our-


selves that, in spite of the clash we have had over some points, we have been able to reach agreement on a great many others. I would like to associate myself with the nice things said about the way in which the Chancellor has met us, assisted by the Financial Secretary and the Solicitor-General. Also, we appreciate all the trouble taken by his advisers to dig into ancient history and to look into the problems that have been put forward, so that we might have the best opinion before us in settling these points. As a result, I think we can agree that we have made considerable progress in the aim which we set before us.
The Chancellor jokingly suggested that we had overlooked E.P.T. I can assure him that has not been out of our minds. Industry is very glad to get rid of it, and I noticed that the Government are also very glad to get rid of it. I am quite certain that it is not entirely out of consideration for our feelings that they took that attitude because I think we all agree it will pay the Government to get rid of it. In due course we hope to get back on to a level keel, but I hope that the Chancellor in looking round, as he said, for something else will not presume that we shall have prosperity for ever. We do not want to stifle enterprise. I do not believe that there is any permanent recipe for prosperity without a mighty effort, and one of these days we shall find that we are not on the "prosperity wagon," to use the American phrase, and shall have to work very hard. We shall want as few hindrances as possible put in our way. We have a slogan in our business, "The only way to be safe is never to feel secure." I can assure the Chancellor that we do not feel secure at the present time.
The hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) referred to the fact that while it was very nice to hear the Chancellor take £500 off the revenue he proposes to raise, he is having that £500 off a very heavily inflated wartime Budget——

Mr. Dalton: Five hundred million pounds.

Sir P. Bennett: Thank you. We shall not be able to raise that amount of money and spend it, as we have in the past, and at the same time renew our equipment, provided increased facilities

become available. So I hope the Chancellor will not presume, as I am sure he will not, that we are on a permanent straight line, and that we can go on exactly as we were. We shall have to work very hard, and we must not presume that the revenue will keep up at its present high level without our making very great exertions, so we cannot afford to carry any additional burdens while we are getting the country going again.
We are very grateful for the various concessions—that old buildings which are scrapped and replaced by new ones will not now lose their deferred allowance; that the Chancellor has accepted our arguments with regard to the cancelling of leases and contracts; and that rehabilitation expenditure would not have been counted in 1946 but for the new Clause which the Chancellor has accepted. Most important of all, he has allowed us time to carry out the deferred repairs and the rehabilitation for a further year. Like him, I hope we shall get it through but, with building in its present position, I am quite certain that if the time comes when we can prove that we have not been able to do so, he will not be hard on us if the circumstances which have prevented it are beyond our control.

Mr. Dalton: Mr. Dalton indicated assent.

Sir P. Bennett: I am sorry the right hon. Gentleman has not been able to accept the position which we put before him with regard to the capital side of rehabilitation, and with regard to the Income Tax and Profits Tax, but he has promised to look into it between now and the next Budget, and we hope that he and his advisers will see the justice of the case we have put forward and perhaps be able to meet us in some way. He has also promised to consider the question of relief to the contributions for technical education. At the moment, such things as the proposed staff college would not come into it, but I am sure we have his sympathy in the steps we are taking in that direction.
The Bill has been improved since it was first introduced, but even then the Chancellor had taken very considerable steps to carry out the undertakings given by his predecessors at the time E.P.T. was introduced. We feel that, working together with him as we have, we have achieved for industry a very considerable amount of assistance in the very difficult


task upon which we are engaged. I know that some of the concessions for which we asked have not been granted, not because he was not satisfied that we deserved them, but because he was afraid that somebody else who was not as honest and straightforward as the majority of us, would benefit. I would like to support the plea made from one of these benches earlier that the majority of the people are honest, and it is rather hard on the honest man to know that he cannot have his due because of the fear that some dishonest person will get away with something he ought not. That argument can be carried too far and I hope the Chancellor, in thinking out his next Budget, will not be quite so hard and will not take such an extreme line as the Solicitor-General suggested, simply because he is frightened that some dishonest person will get away with it. Hard cases, I know, make bad law, but at the same time they also make a lot of grumbling which we hear about.
I come back to the question of Purchase Tax. Again, I appreciate the danger of inflation but, as I have said before, we shall not always have prosperity and one of these days we shall want to sell goods in order to find employment. When that day comes, I feel sure that the whole question of Purchase Tax will have to receive very careful consideration. When that time comes, I hope that the point made by my hon. Friend the Member for Harwich (Sir S. Holmes) will receive consideration, because I can assure the right hon. Gentleman that there will be some very empty showrooms when there is any suggestion that Purchase Tax is to be taken off. Some of the industries which need heavy stocking of their goods know perfectly well that when a change in model is coming along the showrooms empty, because the public will not buy an old model. If there is a drop in price coming, the public wait. Unless something is done at that time to meet the point put forward by my hon. Friend we shall have trouble. I commend the matter to the Chancellor. I am sure the day will come when some of the heavy Purchase Tax will have to be taken off, and these points will have to be dealt with.
We have had every consideration of our points of view, and we are grateful for that. We must get production going, because all depends upon it. The Chan-

cellor's Budget is absolutely dependent on our maintaining production at a high level. The profit is earned on the floor of the shop, and we have to get back there to see that it is earned. There is just one lurking fear at the back of our minds. I have mentioned it to the Chancellor, and he knows to what I am referring, that when the winter comes we shall not have sufficient coal to run industry. Without fuel supplies our plans will come to nought. If we cannot have that necessary fuel it is no use saying that we can have oil fuel instead of coal. That will take a large capital expenditure and will only fill a small part of the gap. I urge the Chancellor and his colleagues to remember that the success of this Budget depends not only on our efforts but on theirs, in seeing that industry has its full supply of fuel, whether in the form of coal or gas or electricity, to enable us to do our work. If he does that we shall put our backs into it, and do all we can to make his Budget, which is now only a Bill, a reality.

12.43 p.m.

Major Bruce: I should like to refer to what I believe has frequently been the background of our discussions, not only on Second Reading but also in Committee, and indeed on the Third Reading. All the way through the Debates, I think that Members on all sides of the House have had in their minds doubts and fears as to whether the particular points they were pursuing were within the ability of the national Exchequer to accommodate. We have all had our pet subjects, on which we have thought deeply about Income and Purchase Tax reliefs, but we have not really known the final background of the national finances itself. There has been much talk of inflation, but we have never really had a complete statement on which the whole Budget is based. I should like to refer to the financial statement contained in Table 14 in the original Budget Statement. I would submit to the House that the statement there presented still does not provide Members with satisfactory information to determine whether inflation is likely to occur as a result of this or that reform if it were brought into operation. It does not provide sufficient information for Members to be able to determine whether or not that aspect of the nation's affairs expressed in the Finance Bill are being conducted properly.
I have spoken to the Chancellor privately on this point many times. He has given me assurances that he will examine the whole question of giving indications in the financial statement as to the broad nature of Government expenditure during the following year, and in particular, of making some distinction between expenditure on revenue account and expenditure on capital account, because it is really quite impossible to determine whether the nation's accounts are balanced in a satisfactory manner until one has some broad indication of this kind. I do not think it can be said of the present Government that they have been backward in supplying information in other spheres. I am certainly not making any complaint against the information already contained in this statement, which, of course, supplemented by the material provided by the "Monthly Digest of Statistics," provides Members with far more information than they have ever had before. But I think that when we are weighing these matters of high policy—and indeed the whole financial policy of the nation depends on what happens in the discussion of this Bill—we should have far more precise information of the character which I have already mentioned.
It may be said that the necessity existed in the years before the war, when the bulk of industry was in the hands of private enterprise. If that was true formerly, then, as the field of nationalisation grows greater, as indeed it will in the years that lie ahead, it is even more indispensible that we should have far more definite information of the kind I have mentioned, on which we can base our suppositions and arguments in the House. That is the only observation of substance which I have to offer on the Finance Bill at the present time.
I would like to congratulate the Chancellor on his Bill, which I think is an excellent Bill, and indeed supplements the extremely sound financial policy which he is putting into operation. I was extremely pleased to note that he had, I thought, softened a little in regard to his attitude on the Purchase Tax. On the Second Reading of the Finance Bill I gathered the impression that he was toying with the idea of retaining it as a permanent feature of our national taxation system. I thought from his remarks today, and from one or two remarks which fell from him in the

Committee stage, that he had thought again about that, and that we would not have, for all eternity, what I believe to be a rather undesirable form of taxation hanging round our necks.

12.48 p.m.

Sir Waldron Smithers: I am sorry that I cannot join in the throwing of bouquets across the Floor of the House, because I look upon this Third Reading of the Finance Bill as a very important stage in the year's work. I do not want to say anything too strong, but I look on the Chancellor as the biggest menace to this country. The Third Reading of the Finance Bill marks another milestone down the road to serfdom, because this Government are using the financial weapon to try and control all the daily activities of our lives and of our businesses. I would draw the attention of the House to the colossal sums involved, even after a year of peace. The balance sheet totals up on either side, roughly, to £3,888 million. I would say, in passing—and it has nothing to do with the Finance Bill—that in addition to that on almost the same class of people £244,806,000 are raised in rates. That is in the financial statement, page 67.
I want to call attention to another point, which I do not think has been mentioned. Cmd. 6784 of 1945 gives the figures of the proportion of private income required to meet taxation. That, of course, has nothing to do with rates. The years mentioned in that return are 1938— £1,132 million, and 1945— £3,200 million. The percentage of private income required to meet taxation in 1938 was 23 per cent. In 1945 it was 34 per cent. If the Chancellor would ask the Financial Secretary, when he replies to the Debate, to say what it would be this year, I should be grateful. All this goes to point that the State has no money. The State is not a fairy godmother with a bottomless purse. The way in which our national commitments have increased since the beginning of the century is almost frightening. Before the 1914–1918 war the National Debt was £661 million. On 31st March, 1946, in round figures, the National Debt was £23,000 million. This cannot go on. We have been living since 1900 on the capital which was won by our forefathers by free trade, free enterprise and thrift which gave us the highest standard of living in Europe. The fact is that this


country has now come nearly to the end of its tether. We have had to borrow from America and if we have a repetition of the 1931 crisis, which is quite possible, the position has so deteriorated in the last 30 or 40 years that it may mean a major disaster.
I ask the Chancellor of the Exchequer to note this simple point, that the principles behind his national Budget are exactly the same principles which should guide the budget of his home or my home. If more is spent than is received in income, there is the inevitable knocking at the door from the broker's man and we are bankrupt. I hope the Chancellor will not mind if I quote a short passage from a letter. His financial proposals have been described as "bucket shop finance." I would like him to hear an honest opinion from a correspondent who says:
 Here is a typical and topical example. In order to find money to finance Socialism, the price of gilt-edged securities is being maintained at an artificially high level. This can only be attained by rigid capital control which places immense restrictions upon normal commercial activity. Mr. Dalton is in effect rigging the market, a practice which, were it possible for him to carry out as a private operator, would undoubtedly land him in gaol.
Having regard to the years leading up to this Budget, I think it is important to call the attention of the House, and the country, to the way in which our Civil Estimates have increased. I will give one or two appropriate years—at the beginning of the century, before the 1914–18 war, and before the last war. These figures have been prepared by one of the assistant librarians in the House of Commons. I would like to pay tribute to the wonderful help that the librarians have given to Members, especially in the last few years. In 1901–1902 the grand total of the Civil Estimates, in round figures, was £47 million; in 1913–1914, it was £83 million; in 1916 it was £600 million, and so it goes on rising and rising until in 1946 the gross Civil Estimates are £2,523 million gross and £2,090 million net. The net estimate for 1946 as compared with 1945 shows an increase of £1,500 million.
Those are very alarming figures. It cannot be repeated too often that England is different from every other country in the world in that we are not, and cannot

become, self-supporting. We have to import to exist and in order to import we have to export at world competitive prices or starve. The enormous increases which I have just quoted, and the enormous increase in the National Debt, has to be met and that money must be earned. That money has to come out of industry. That must increase our cost of production and must, therefore, impede or destroy our ability to compete in the markets of the world. As was shown during the Debate last night, whatever the merits or demerits of this enormous expenditure in social services, Britain's first job today is to earn next week's bread and butter. The sooner the public are told the truth about certain economic and financial considerations which affect the livelihood and the life of every family in the land, the better it will be. The Chancellor of the Exchequer in his Budget Statement said:
We are providing this year no less than £335 million for cost of living subsidies.'—[OFFICIAL REPORT, 9th April, 1946; Vol. 120, c. 1813.]
I presume that was a definite attempt to stop inflation. In answer to a recent Question which I asked the Chancellor, he informed me that the purchasing power of the pound sterling was only ·45, when the Question was answered, as compared with 1900—that is 9s. Without in any way appearing to doubt the Chancellor's word, I want to put this point to him very strongly. In arriving at that figure has he taken into account the £335 million food subsidy? I hope the Financial Secretary will answer that point. How much more will that £335 million have been increased by the increase in farmers' prices and other things since he announced that figure?

Mr. Dalton: I can answer that question right away. I answered a Question yesterday which was asked by the hon. Member for Newbury (Mr. Hurd). The answer appears in HANSARD this morning and I think the hon. Gentleman will find that it is quite clear.

Sir W. Smithers: I thank the Chancellor for that.

Mr. Dalton: Since my Budget estimate was made, the cost of the food subsidies, which are the major part of the cost of living subsidies, is estimated to have increased by £16 million net. The cost of the new proposals to the farmers is greater


than that, but it is diminished in the total owing to the fact that the cost of living subsidies in respect of imported foods are diminished by reason of the tact that smaller quantities will come in. The answer is in HANSARD.

Sir W. Smithers: The important point is whether the Chancellor took into account when estimating the purchasing power as 9s., the £35 million of subsidies. A financial expert, having seen my Question in the House, took the trouble to go to Harrods and the Civil Service Stores and get their price lists for 1900, and he went carefully into the budgets of two typical middle class families during that period. He worked it out that on that basis the purchasing power of the pound sterling compared with 1900 is now only about 4s. 6d. To show how little these points are understood—I say this with great respect to hon. Members—the other day I was in the Library of the House of Commons and I heard two hon. Members talking. I do not know who they were, but one said to the other, "How can an unemployed man live on £2 5s. a week?" Of course, under the policy of this Government which allows inflation to run almost riot, £2 5s. does not buy much.

Mr. Jack Jones: What about 2s. a week for a child?

Sir W. Smithers: The same thing applies. It is worth only about 6d. compared with what it was. Whatever London School of Economics theories the Chancellor may put into practice, the law of supply and demand will come along like a steamroller sooner or later and will leave him on the hard high road of reality. What is the real intention behind the financial policy of the Government? The intention behind the policy was enunciated by the President of the Board of Trade when he was a freelance demagogue. He said:
The Socialist Government's first step will be to call Parliament together at the earliest moment, and place before it an Emergency Powers Bill to be passed through all its stages on the first day. This Bill will be wide enough in its terms to allow all that will be immediately necessary to be done by Ministerial orders. These orders must be incapable of challenge in the Courts.
He went on to say at Hemsworth:
We have got to seize the economic citadel of Capitalism which includes finance and the

land, which is absolutely vital, and which is the only alternative form of investment. When we have got these, we can take the great basic Industries of the country.
I have asked, what is the real intention of the Government? Those two statements of policy made by one of the leading Members of the Cabinet show clearly what the intention is.

Mr. J. Jones: We are sticking to our promises.

Sir W. Smithers: I am a very nervous person. [Laughter.] Would the Government side kindly keep quiet for a few minutes? Although the Government did not adopt those financial methods on the first day as advocated, they are carrying out that policy as quickly as they can. They have already taken the Bank of England and coal, and there is a whole list of industries which they are now preparing to nationalise. They are taking the real wealth by compulsion, and in return they are giving the rightful owners pieces of non-negotiable paper. When they have got all the real wealth of the country, what is to stop them tearing up that paper, making it worthless and wiping out all debts for all time in exactly the same way as Germany did after the first world war? They are so obsessed with vanity and drunk with power that I do not put that beyond them. They are determined to enact these theories and slogans regardless of the consequences.
I want to make another point which must affect this Finance Bill, and it concerns the bulk purchases of food by the Government. I am informed that the food shortage is not nearly so serious as many people are led to believe, If the Government send as representatives of the British Government three men who are inexperienced in business—the Leader of the House, the late Minister of Food and the present Minister of Food—across the Atlantic by aeroplane to America and, as has been reported, when they get there the present Minister of Food waves a coupon form in President Truman's face, they advertise to the whole world, unhappily, that 45 million people are short of food. There may also be 10 million or 12 million people who will die this year of starvation in China, India, and perhaps in Europe. The strongest human instinct is self preservation. What is the natural reaction to this kind of dramatic voyage across the Atlantic by inex-


perienced people? The natural reaction of every wholesaler in the world will first be to put a bit aside far himself, his wife and family and then to hold the rest for higher prices. Whatever laws are passed, we cannot stop that. What available food there is in the world would be much more equitably distributed if we allowed the hitherto normal channels of trade, such as the Baltic, Mincing Lane and other big associations, to operate normally. The available food would then be distributed without engendering international heat.
In the Chancellor's Budget Statement, referring to the American Loan, he said:
My Budget has been prepared on the assumption that the agreement will be approved.—[OFFICIAL REPORT, 9th April, 1946; Vol. 421, C. I820.]
I look upon the passing of the American Loan as a major disaster. First of all, it gives a new lease of life—I hope a short one—to this Government and then, as does the £335 million food subsidy, it prevents the people of this country from being brought face to face with hard facts. I doubt if ever we can repay that loan.

Mr. Deputy-Speaker (Mr. Hubert Beaumont): The hon. Member has had considerable latitude, but he is now going much too far. I find nothing in the Finance Bill about the American Loan.

Sir W. Smithers: With respect, the Chancellor himself said:
Some of the figures I have used would need to be amended if it failed."—[OFFICIAL REPORT; Vol. 421, c. 1820.]

Mr. Deputy-Speaker: The hon. Gentleman might have been in Order in discussing this on the Second Reading, but he is not in Order in discussing it on the Third Reading. We are now discussing what is in the Bill.

Mr. Oliver Stanley: Further to that point' of Order During your absence, when Mr. Speaker was in the Chair, we had a quite long discussion on the wage levels of the Inland Revenue officials and their affection for the Chancellor. I have since read through the Bill and seen nothing in the Bill on those subjects, but discussion on those points was permitted.

Mr. Deputy-Speaker: I am sure the right hon. Gentleman does not expect me to comment upon what has passed. I am concerned only with the present.

Sir W. Smithers: With great respect, if this American Loan had not been granted the whole of the Finance Bill would have been upset, as the Chancellor himself said in his Budget speech.

Mr. Deputy-Speaker: The hon. Member must realise that he must keep to what is in the Bill. That is all that is permissible on the Third Reading.

Sir W. Smithers: The American Loan is in the Bill now.

Mr. Callaghan: Where? What Clause?

Sir W. Smithers: My last point is this. The Chancellor and his right hon Friends are carrying out a policy with which I disagree absolutely. They are like Hitler in Germany, who put a positive but fatal idea forward in order to get control of the German people. It was, "Deutschland uber alles." At the last Election the Socialist Party put forward a positive but fatal idea, namely, "A materialistic Utopia." It will fail. It is against the natural law. I say, with great reverence, we are commanded to seek first the Kingdom of God, and all these material things shall be added. The policy of this Government is to hold out to the people the hope that they can have all the material benefits promised in this Bill. The real basis for successful reconstruction after the war, and a return to prosperity, is to have a nation of better men and better women.

1.13 p.m.

Mr. Diamond: I feel sure the whole House will forgive me if I do not follow the somewhat lugubrious speech which we have just heard from the hon. Gentleman the Member for Orpington (Sir W. Smithers), on his steamroller journey down the road of serfdom, as I think he put it. I would refer to one remark which I did detect had some connection with the Finance Bill, namely, that it does, of course, depend entirely what we get for our money whether the tax paid is well spent or not. Rather do I agree with the hon. Gentleman the Member for Edgbaston (Sir P. Bennett)—who, unlike the majority of the Conservative Party, is in his seat—that we should take a rather wider view of the Bill at this stage, on its Third reading. It has indeed been a very pleasant occasion. It has been a Debate which we have all enjoyed. We have particularly


enjoyed listening to the cogent arguments from the Government Front Bench as to why certain things should be done, and the perhaps less cogent, but quite as entertaining if not more entertaining, remarks of the right hon. Gentleman the Member for West Bristol (Mr. Stanley) as to why things should not be done, and why the Debate should not proceed. If, at the time he honoured us with his interventions, we had been discussing Entertainments Duty so far as listening to Debates in this House was concerned, I am sure the whole House would have readily agreed that Entertainments Duty should be imposed on those occasions.
The hon. and gallant Gentleman the Member for Holderness (Lieut.-Commander Braithwaite) stressed the point that at this stage one year after the war, it was natural to expect that our taxation would be considerably reduced. That must be considered in relation to what happened after the 1914–18 war. I would like to refresh the memories of hon. Members as to what happened after the 1914–18 war. It was not until five years after the end of that war that the standard rate of tax was reduced below the level at which it existed at the close of the war. The first thing that happened then was that the rate of tax went up. That was something which might have been expected to happen, and it might have been expected to repeat itself. There has been considerable criticism about the earned income relief, which, as we know, is going up to one-eighth in October. That has very much the effect of being as high as one-sixth for the second half of this year, the six months from October onwards. What happened in that respect after the 1914–18 war? It was not until seven years after the end of that war that the earned income relief was increased from one-tenth to one-sixth.
I think these circumstances should be borne in mind in comparing the achievement of this Government with the achievement of the Government after the 1914–18 war. On this side of the House we are very glad indeed to do everything possible to help industry. We are more sincerely concerned with the well-being of industry than are hon. Members on the other side with the well-being of railwaymen and other sections of the working class, who from time to time they claim to represent. From that point of view we are

very glad that the Excess Profits Tax has been completely removed, as indeed was requested from these benches on many occasions on the previous Budget.
I desire to refer particularly to Clause 28, which my hon. Friend previously mentioned from perhaps a slightly different point of view. Those of us who are interested on behalf of charities in collecting subscriptions from charitably minded persons welcome this Clause. Though we welcome it we want to take the opportunity of making it quite clear that the restriction introduced by this Clause is something which affects a person who makes the donation and does not affect the charity in the slightest. We would like it made quite clear that the Government are not for one moment suggesting it is in any way improper for a charitably minded, person to enter into a seven year deed of covenant with a charity. I mention that because it has come to my notice on more than one occasion since the Finance Bill was first introduced, that many people are of the opinion that, inasmuch as for a long time the Government did not express their point of view with regard to the impropriety of obtaining Surtax relief on charitable payments, they should take an early opportunity of expressing their view with regard to the complete propriety of a charity accepting payments under seven year deeds of covenant, under which they would obtain Income Tax relief. Of course, insofar as Surtax relief on the payment would no longer be available, we on these benches support it entirely. Nobody can claim to say, for one second, that a man who enters into a covenant of this sort and makes a payment to a charity solely because he is going to get a very large proportion of it refunded, in effect, by the Inland Revenue, is a charitably minded person, or should be helped in any way.
I want to make one further reference to the wide sweep of this Finance Bill, particularly to Part VI, which deals with the National Land Fund, something which I do not think hon. Members on these benches tire in praising. It does show that, for the first time, we have a Chancellor who has a heart as well as a brain. On previous occasions we have been accustomed to Chancellors who had hearts, the ticking of which merely represented the automatic beat of an adding machine. On this occasion we are very


pleased indeed with the generous scope of the Bill and we welcome it in full measure.

1.20 p.m.

Mr. I. J. Pitman: I am very grateful for this opportunity of catching your eye, Mr. Deputy-Speaker, and I would like to remind the retreating form of the Chancellor as he leaves the House that it was not when he said that all Surtax payers would be getting a remission that I interrupted him, but when he claimed that all Income Tax payers were getting a remission as a result of these two Budgets. It is a point of accuracy that there are working men, and working men at a low level of wage—the very type of railwaymen the hon. Member for Blackley (Mr. Diamond) mentioned—who are paying more tax under these two Budgets than under the previous one. At £264 a year, roughly speaking £5 a week, which works out at £1 13s. 10d. a week coming into the house per head, the taxation is actually more than it was, and the curious thing is, as I pointed out in the discussion on the October Budget, that the more children this small wage-earner has, the worse his tax situation becomes until, if he has five children—which is not an unreasonable figure; the total sum coming into the house is only £1 7s. 8d. per week, not a big sum—the actual tax per year is 33s. a year more than it used to be.
The reason why at certain values, at certain income groups in the scale, people are paying more tax is a rather complicated one to understand. To begin with, it is really based on the earned income allowances. Whereas in the wartime Budgets a man was appearing to get a remission of only one-tenth, he was in point of fact really getting a remission of one-sixth, because he was getting a postwar credit of one-fifteenth, and the total amount of postwar credit was available to him up to £100 per annum on his earned income. So that, whereas in the wartime Budget there was an earned income relief of £250, it has now been reduced, at the eighth figure, to a total of £150, a difference of £100. Then take, again the married allowance. During the war that was £140, with £30 as a payment towards the postwar credit, so that the tax remission has not substantially improved from £140 to £180, but only insignificantly reduced from £170 to £180. Moreover,

owing to the fact that the 3s., rate begins at £50 and the 9s. full rate after another £75, the rate under the new peacetime Budget reaches the full 9s. at £125 instead of, as before, at £165. So there is a £40 difference there.
I have made out, in terms of weekly income, a graph showing the effect for single people, for married people with no children and for married people with from one to five children. The blue line represents the weekly income of the taxpayer. Where there is a red line it represents, if below the line, a remission of tax compared with the wartime Budget and, if above the line, an addition to taxation. Hon. Members will see that at five children the annual tax increase to the taxpayer actually exceeds the income coming in per head of the family. It is definitely a fact that the amount of tax has gone up for the small working man. I thought that the Chancellor had not appreciated my point; it was furthermore clear, from his answer to me when I interrupted, that he has not yet understood this point, because he is under the impression that all my previous efforts have been directed to the Surtax payer. All my speeches have been on this story of the small working man and his earned income. I did interrupt him once on the question of Surtax, and pointed out that, if the number of children went up sufficiently, it would lead to a Surtax payer paying more tax, but that was not because of the Surtax regulation but because of the Income Tax. If we regard tax as tax and money collected for postwar credit as money returnable to the taxpayer and, therefore, not tax, it is definitely the case that taxation has gone up since the war for a very limited number of taxpayers, who are just the sort of railwaymen whom the hon. Member opposite mentioned.
Therefore, I appeal confidently to the Chancellor, and to hon. Members opposite to join us in asking him to do better next year for the small man. He likened himself to Moses, and I suppose that the Financial Secretary can only be Aaron. I hope his rod will not be too heavy, and I hope that he will not regard this from the point of view of economy to the nation but as a matter of importance in principle, that after a great victorious war taxation should not be increased upon the small working man and in such a way


that the more children he has, the more taxation he has to bear. That is wholly wrong, and I hope it will be put right.
I would like to say something on the question of indirect and direct taxation. Indirect taxation is another of those things which bear heavily on the small working man, and therefore direct taxation is the more sound form of tax. Postage of 2½d. is a form of indirect taxation. If a man is out of work and writes a letter to obtain a situation, he does not realise that he is paying taxation and it does not depress him, but that, frankly, is due to his lack of appreciation of the situation. It seems to me wrong that we in this House should build on this lack of appreciation by the people who pay indirect taxation that they are in fact paying. It is much more desirable, because tax will fall on the people most able to bear it, that the taxation should be direct and the people should realise they are paying it. I hope that hon. Members studied the figures for the distribution of the national income. I hope they realise the 98 per cent. of the national income is now in the hands of any but the highest taxpayers, and that those with incomes of over £2,000 have less than two per cent. of the national income. Expenditure will therefore have to be met out of direct and indirect taxation from the ordinary citizens. We deplore the Purchase Tax and indirect taxation of all kinds, not only because this form of taxation falls heavily on the poorer man, but because it disguises the situation.
I would like also to refer to the Profits Tax. It seems to me to be a thoroughly bad tax, and I am sorry it was not called what, in fact, it is, an equity Profits Tax. The Argentine railways are beginning to resume their dividends. It may be that some substantial holder of debentures will now be receiving interests which he did not have. That is taken care of by Surtax, and it is a perfectly sane and sensible provision, but why should the man who holds debentures not be subject to Profits Tax, whereas the man who happens to buy an ordinary share in the same company is subject to Profits Tax? The Profits Tax is a most discriminating and unfair tax, since it is based not on income but on the type of share. That is to say, the poorer man who holds an equity share pays Profits Tax, whereas the

rich man who holds debentures does not pay the tax. According to the philosophy of hon. Members opposite, that seems wholly wrong. I hope that the Chancellor will think this over, and that next year he will have proposals for abolishing this tax.

1.32 p.m.

Mr. J. L. Williams: The hon. Member for Bath Mr. J. Pitman) has asked the Chancellor to do more next year for the lower Income Tax payers, and he will find no objections to that in any part of the House. I gather that 2 million taxpayers have been put outside the range of taxation this year, and that an additional 500,000 will follow. That is not a bad beginning. I want to deal with the reactions of an industrial constituency to the provisions of this Bill. There have been reliefs in indirect taxation, but in regard to the Purchase Tax my constituency would have liked more articles to be put outside its range. They would also like to see the reliefs in respect of entertainments extended to other spheres. I have spoken about one of these in a former Debate. They have noted that 70 per cent. of the reliefs in taxation has been given to the Income Tax payer. The Chancellor has made no promise of reliefs in indirect taxation until the burden is lifted from Income Tax payers. I find a great deal of resentment among men and women in my constituency that payments for overtime should be so heavily taxed. I would not go so far as to say that people keep away from work in order to avoid Income Tax. But they feel that an excessive part of the revenue is coming from people in the lower ranges. This is now to be straightened out to some extent.
I find that people do not mind paying taxes, because they feel they are making their contribution to the revenue or the nation. They often say it is hard to pay Income Tax because they get nothing for it to consume, and they would rather pay their tax when purchasing an article. That takes us a long way from the popular idea that indirect taxation is worse than direct taxation. It goes back to the starving Forties, when we had a rather unpleasant form of bread rationing imposed by the landowners in a landowners' Parliament. Direct taxation was confined then almost entirely to people who had a comfortable level of income.


Today there have been changes, and there are these expressions of opinion now coming from many working people. I am not sorry that the Purchase Tax is being maintained, although I consider that a wider range of articles should be outside the tax, or should be taxed at a reduced rate. The Purchase Tax remains a desirable form of revenue. I would not say it should be permanent, because it is difficult to apply that word to anything in these days, but it should not be regarded as a temporary tax.
I notice that the Chancellor has given relief to Income Tax payers chiefly by lifting the personal allowance but also by widening the gap between direct and indirect taxation. I believe more relief along these lines would be far more acceptable even than the reduction in the rate of taxation itself. I do not want to make any kind of pronouncement on what should happen in the future in regard to the relation of direct to indirect taxation. I am merely reporting what I find among the working men and women in my constituency. Personally I believe we are heading towards modification in relation to these taxes. My right hon. Friend the Chancellor of the Exchequer may be evolving this change, and arriving at a balance that will be more commendable to the general body of taxpayers of this country.

1.41 p.m.

Mr. Spearman: However critical I may be of the financial policy of the Government, I do not feel that I have any confidence in my own ability to express those views in a Third Reading speech without getting out of Order, so I will confine myself briefly to only one point. Before that, however, I should like to make, if I may, two comments on two previous speeches. First of all, I should like to associate myself with the views expressed by my hon. Friend the Member for Edgbaston (Sir P. Bennett) with regard to the Purchase Tax. If the Chancellor had said that he must maintain this tax at this high level or even if he considered with the present inflationary danger that he should actually increase it, I should not have felt able to be so critical, but I was sorry to hear him say that he looked upon this more or less as a permanent tax, because I would have thought it would be a far more effective deterrent to inflation if the Chancellor said, "This

is entirely a temporary tax, which. I am going to maintain at a very high level in this critical period and then I hope to abolish it completely." I think that that would have been a measure of encouragement to consumers riot to buy, because by holding on for a comparatively short time they would buy their goods and materials very much cheaper. That would seem to me to encourage hoarding which we want just now, leaving a reserve of purchasing power for the days to come, when, as the hon. Member for Edgbaston said, the Chancellor might need purchasing power to maintain employment.
The other point I should like to make is with regard to one item of the speech of the hon. Member for South Cardiff (Mr. Callaghan). I am sorry he is not in his place at the moment, but if he should happen to read my remarks I should like to tell him how interested we all were in the admiration he expressed for the Chancellor of the Exchequer. Perhaps, however, we were disappointed to find that his speech was one in which he had claims to make, and, therefore, his admiration was not quite so disinterested as we at first hoped. The hon. Member raised rather serious fears of what might happen if dividends were increased. That I feel sure is a subject which we could not expand upon, but in order to put the matter in its proper perspective perhaps I may give the actual figures. The amount that was paid out in dividends on ordinary shares in 1944 was £350 million, or 5 per cent. of the national income. The amount paid out in wages in that year was £2,865 million or 41 per cent, of the national income. I am not making any comment on that proportion or suggesting that it is not the right one, but I mention it only to get the thing in the right perspective, because I feel, no matter how unintentional it was, the hon. Member did create the impression that the dividend on ordinary shares took a far greater share of national income than was actually the case.
The point I want to come to is the method of calculating Death Duties. The Chancellor of the Exchequer in his Budget speech did give, as I understood him, a blessing to what he described as a moderate inheritance. I think he said that we should seek to secure this for all. I want to suggest to him that the present method of calculating Death Duties on the amount of money left is inappropriate


to the expression of opinion that he gave. At the time when Death Duties were very small it was quite all right, but now they have run to such large proportions I do ask him to consider whether he could not in the future calculate the amount to be paid not on the amount that is left but on the amount that is inherited.
If I might give an illustration to describe what I mean, if I had £100,000 and one son and four daughters—I make no claim to any of these things—and I left half my fortune to my son and divided the rest amongst the daughters, the result would be that my estate would pay £30,000 in duty, my son would get £35,000 and each of my daughters £9,000, or, if invested in Government stocks at the current rates, £225 per annum. If the duty were calculated on the amount received, which does seem to be a much fairer way, it would work out differently. I see my hon. Friend the Member for South Cardiff is back in his place, and as I know how punctilious he is about figures, I must speak with due caution and say to within approximately £100. The position would be this—the son would receive £39,000, which is only a small percentage more than he would receive under the present method, but the daughters, on the other hand, would receive £12,000, which is a considerable proportion more and is enough to bring them in £300 a year instead of £225, a nice reasonable inheritance.
I would have thought that this method would not only have been much fairer but that it would be welcomed by hon. Members opposite as an encouragement to a more complete distribution of wealth. I should have thought that they would like a testator to be encouraged to divide up his money as much as possible, and by present methods he certainly is not so encouraged. If I might take the extreme case of a very rich man who wanted to leave £10,000 to some deserving legatee, or a sum sufficient to bring that legatee in £250 a year. If he were a very rich man that legatee would not get £250 a year, but £62 10s. It is too late on this occasion to make any change in the present system, but I hope that the Financial Secretary to the Treasury will put the point to the Chancellor some time in the future that Death Duties should be calculated on the amount

received and not on the amount of the total estate.

1.49 p.m.

Mr. Harold Davies: At this stage of the Third Reading I do not propose to keep the House more than two or three minutes, but I should like to point out how delighted I was to receive a letter from the Silk and Rayon Association expressing appreciation of the concession the Chancellor was able to make in the proposal to reduce the duty on goods containing natural silk from the level of Doc, per cent. to 33⅓ per cent. In my constituency of Leek, which during the war helped the war effort tremendously by producing silk commodities, my constituents, both trade unionists and employers, were looking at this aspect of the industry. Here we have a practical example of the Chancellor of the Exchequer's effort to release the springs of production in this difficult transition stage.
Earlier today, an hon. Member opposite compared us, almost, with the United States of America in regard to inflation. It is a grave error to give the country the impression that we are heading right into inflation. Those of us who have tried to think carefully about the Budget and this Bill appreciate my right hon. Friend's difficulties. His Budget was one which called upon the spirit of sportsmanship and fair play of employers and workers. It is absolutely essential that we should get the necessary coal and fuel production during the coming year. My right hon. Friend's Budget did not depend upon what would or would not happen about the American Loan, but upon the productive effort of our people, not the people of any other country. If we can get that productive effort and cooperation I am sure that we shall come through this financial year quite successfully. In my constituency, the silk industry appreciates my right hon. Friend's efforts to relieve their burden, and I am sure that women generally will appreciate that a little more luxury and a little less price will be able to enter into their lives in future. I congratulate my right hon. Friend on his concession to the silk industry.

1.52 p.m.

Mrs. Leah Manning: I want to intervene for a few moments, first of all to say that I shall support the Third Reading of this Bill with much more satisfaction after hearing my right hon. Friend the


Chancellor say this morning that he was not propounding principles of taxation for eternity, but only for the time in which he is operating. If he had not said that, I should have felt very disturbed, because of the quite blunt statement he made a short time ago about Purchase Tax. I think it is quite well known that on this side of the House there is a division of opinion on this point. An hon. Member opposite said that there is a changing view. I do not believe that there is a permanently changing view on this important topic, and that is why I am satisfied with what my right hon. Friend said about operating for the time being. If he were to go beyond that I should have said that he was making a profound mistake, and that he was changing what had been the philisophy of taxation in this party for many years.
I agree that the crushing burden of direct taxation is quite sufficient for all of us to make any relief one which is most acceptable. If I dare mention housewives—and I hesitate to do so, because they have been dragged through the Chamber unmercifully during the last few days—it is to say that, whereas they like to feel that the family income is free from the burden of Income Tax, and that they are prepared to wait for more expensive articles on which Purchase Tax still remains, I do not believe that they would feel like that after four or five years. By then they will expect to be able to go freely into the shops and buy all the things they want for themselves, their children, and their households. They feel that if Purchase Tax were to remain on all these things they would, as housewives and mothers, be unfairly penalised.
Indirect taxation does penalise the family, and I am sure that there will be a great deal of satisfaction with the Chancellor's statement today, which showed an appreciable move from the attitude which he took up on the Second Reading and Report stages of the Bill. It is satisfactory to note that he is not propounding the principle of indirect taxation for all time, but only for the time in which he is operating, where relief from direct taxation is an absolute necessity for incentive and where he wishes to prevent too much expenditure and inflation. In future, we want to feel that the things needed in the home shall be completely free from Purchase Tax, and that the housewife and her family will not be

penalised in the way in which they would have been had my right hon. Friend intended that indirect taxation should become a permanent feature of our taxation policy.

1.56 p.m.

Captain Crookshank: The innings is nearly over, and unless something unexpected happens there is only one more name to go on the boards outside—appropriately that of the wicket-keeper, coming in last, the Financial Secretary to the Treasury. As the last but one, I suppose I am one of the bowlers, although whether fast or "googly" I am not quite certain yet. We on this side agree with the Chancellor's remark about the assistance which has been rendered to the House and the Committee by his two adjutants, the Solicitor-General and the Financial Secretary. Having said that, I am sure that Members will be heaving a sigh of relief at the ending of our financial discussions for this part of the year. But frankly, some of us have been very much shocked at the Chancellor's attitude. His frolicsome method of dealing with this important Bill seemed to be out of harmony with the big issues which are involved in it, and the vast amount of taxation that it represents. Some of his remarks were of a levity seldom heard in this House from one holding perhaps the most responsible position after that of the Prime Minister.
We have had, as we always do, every year, a considerable Debate on the different aspects of the Finance Bill, and it is right that we should. The Lord President of the Council made some remarks the other day on the subject of the financial procedure in the House, and as he does not attend our Debates I would ask him to read what happens. He will see that the wisdom of our ancestors devised a procedure whereby the burdens of taxation which, particularly today, weigh so heavily on our nation, receive full and adequate discussion. Let him also reflect that this Bill, in its passage through the House, has been considerably changed. To save his face, the Chancellor said that the Bill had been "a little amended." That is a triumph of understatement, because the Bill has been considerably amended. It could, with advantage, have been amended a great deal more, and could have been still further improved. May I remind the House of some of the changes which have been


made, and which, if it had not been for the careful consideration of the House, would not have been in the Bill as we have it before us today? In Committee very considerable alterations were made, although generally it is in the latter stages that the alterations come. In Committee we altered the arrangements for chargeable processes, and got over what looked like being a very great difficulty and hardship in considerable industries. The hon. Lady the Member for Epping (Mrs. Manning) will remember that we had a little talk about the jewellery trade. There was a change in the Chancellor's original proposals regarding gifts inter vivos, to make sure that anybody who, at the time of the introduction of the Budget, was clear under existing law should remain clear. We inserted new Clauses dealing with rehabilitation costs and cancellation costs. That happened on the Committee stage.
There was, then, the more or less usual interval during which the Chancellor and his advisers were able to consider the points we had made, and on the Report stage there were very considerable alterations. There was the rebate on light oils, a concession made to arguments from this side of the House. There was the allowance for artificial silk in the making of tyres, to which the Chancellor called attention today. There was then the alteration that, in the case of nationalised industries, the penultimate year should not rank for Income Tax purposes in the way in which it does in the case of concluding businesses. There was an increase in the balancing allowances. There was a Clause dealing with the replacement of pre-1937 buildings and linking that up with the allowances due for deferred repairs. There was the increase in the period during which terminal charges could be collected until 1949. We had the reduction in the Purchase Tax on silk, which, as the hon. Member for Leek (Mr. Harold Davies) said, was of very great importance to his constituency, but which also is a rather notable change in that it is an acknowledgment that silk is no longer a luxury article and now goes into the general run of textiles. Finally, there was the alteration that gifts to charities should not have to last two years, but only one year, before they were caught by Death Duties. All those Amendments brought about considerable

changes in the Bill, and. I am glad that, first the Committee, and then the House, decided to introduce them. That they were important cannot be denied.
As was said by my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite), who has helped us so much throughout the proceedings by his contributions, we do not propose to divide against the Bill, but the Chancellor and the Financial Secretary will not, of course, conclude that we think everything in the Bill as it is today is good. I still think that the action with regard to covenants and charities was an unfortunate one. It may be that, under the existing law, there are certain abuses, but it cannot be overlooked that the effect of this on charities will be really devastating, and fro that point of view it is unfortunate that the House should have agreed to it. I still think that the Chancellor has made a mistake in having the age differentiation with regard to the payment of postwar credits. As my hon. and gallant Friend the Member for Holderness said, he resented the discrimination against his sex. I suppose that the Chancellor had considered the figures involved when he made the provision, but through the courtesy of the Minister of Health I have now obtained the figures in the age groups concerned. Of course, the Financial Secretary will be entitled to reply that one cannot go very far on those figures, because it depends on who has postwar credits and who has not; but assuming that the proportion of men and women who have postwar credits is roughly like that of the general trend of the population, it is a fact that there are 1,877,000 men of 65 and over and there are 3,731,000 women of 60 and over, which is twice as many. If it had been kept at the same level of 65, the disproportion would still have been very much in favour of the females, but nothing like so much.

Mrs. Manning: I am sure the right hon. and gallant Gentleman will agree that, in the general run of families, these credits accrue to the males, and that there will not be anything like the same proportion of women as men with postwar credits.

Captain Crookshank: I do not know, and I am sure nobody else knows, but when the disproportion is as great as two to one, I think there are grounds for some complaint. It is not a thing which any-


one can prove one way or the other. We thought that, considering that the expectation of life of men is less than that of women and that the number of them is so much smaller as well, there was an element of unfairness in making this particular remission. We are still dissatisfied that nothing was done regarding the point raised by the hon. Member for Harwich (Sir S. Holmes) about goods in shops when the Purchase Tax is removed. We discussed that matter in Committee and we hoped to discuss it on an Amendment containing an altered plan which we were prepared to put forward for consideration on the Report stage, but that Amendment was not called. Therefore, all we can do now is to beg the Chancellor to look into the matter further and consult with everybody who can help to solve the problem. My hon. Friend the Member for Edgbaston (Sir P. Bennett) made the point clearly that if something is not done to minimise the possible loss to traders and shopkeepers of a budgetary remission of the Purchase Tax or reduction of it, there will be a tendency at certain times of the year very much to understock, and not to be caught with things which cannot be sold. Originally, I had been under the impression that the Purchase Tax was more in the nature of a war tax than anything else, but if the Purchase Tax is to last any length of time, the problem becomes of increasing importance. Therefore, I hope that the Chancellor and his advisers will look into the matter very carefully before the next Budget.
Lastly, there are in the Bill—and we approve of them—the reductions in the Purchase Tax. But on this point, again, I would like to reinforce what was said in an earlier Debate, that the Treasury and the Government really must look into the question of how to handle reductions in this tax. It really is not a good plan, either from the point of view of the House or from the point of view of taxation, to come to the House, as the Chancellor did at one stage in our proceedings, and say, "I have £2 million pounds to give away: let everybody put in a claim and I will think about those claims," and then to pick and choose. It ought not to be just a matter of catching the Chancellor's ear in a matter of this sort. There ought to be some kind of thought, which, from the way in which it was done, we could not assume had taken place, on the effect of

the remission of tax, not only on the would-be purchaser, but on the producer. Whether there is a high or a low Purchase Tax on an article which is being made must have some industrial consequence. In years past, the House went to endless trouble to see that, when it was a question of Import Duties, a very elaborate procedure of investigation was gone into by the Import Duties Advisory Committee. I mention this in passing, not in order to make any point between one side of the House and the other, but because although fears had been expressed for decades before that if we had a tariff system, it would lead to an enormous amount of jobbery and corruption, this was not, in the upshot, the case under the system which was set up. It may be so in other countries, but under the arrangements made by the Import Duties Advisory Committee there was never any suspicion raised against our tariff system on those counts. I do not know the facts, since it is not my responsibility, but I am merely putting it to the Financial Secretary that this matter should be looked into with a view to trying to find some device for placing any possible remissions of Purchase Tax on a much sounder footing than just coming down here and putting the whole matter up to auction and then, in the end, as was bound to happen. exceeding the limit. After the Chancellor had talked about £2 million he had to admit that he had given away—if that is the expression—more than he had first intended.
The other point with regard to the Bill itself upon which I should like to say something is that it has been interesting this morning to hear the advice of the party opposite on the subject of direct and indirect taxation. The Chancellor of the Exchequer said that in the present circumstances, while he was not laying down the law for eternity—which was a delightful phrase because we certainly do not expect him, or even this all powerful dictatorial Government, to try to compete with the Deity in that respect—it was more of an incentive to bring Income Tax down than to reduce indirect taxation. The hon. Member for Kelvingrove (Mr. J. L. Williams) said that people were coming round against direct taxation, and that his constituents were beginning to feel that. All that is very interesting because I suppose the explanation is that some of those people who are coming round are


those who have had to pay direct taxation for the first time. No doubt direct taxation was a grand idea so long as someone else paid it, but now they are discovering that it is not quite such a jolly thing as all that. Hence the philosophy, as the hon. Lady the Member for Epping called it, has been changed. The hon. Lady wants to go back to the good old days—a very nice Conservative view for her to adopt, and some day we may get back to the good old days, but it will not be under this Government.
The reductions in the Excess Profits Tax and its impending abolition are, of course, welcomed everywhere, not least by the industrialists, but there again the Chancellor's speech practically undid all the good that he has done. What on earth is the good in these days, when what we have to try to achieve is a great production drive to get back some stability to industry in the new world in which we live, of the Chancellor coming down here, at the end of July, with veiled threats and saying that everybody will be thinking whether we can have a somewhat similar or alternative tax with the same purpose, and inviting his supporters behind him, of all people, to suggest a new form of taxation on industry to take the place of E.P.T.? This, at a period when the right hon. Gentleman wants stability and greater production, is treating the matter with a levity beyond all description. I could hardly believe my ears when I heard it, and I hope the Chancellor will not go on snaking these veiled threats. If he has something to say, let him come and say it, but if not, for goodness' sake let him keep quiet until he reveals his Budget secrets next year. Then people can proceed on the assumption that E.P.T. is coming off and that is the end of that particular story, but to keep industry and commerce in the whirligig of uncertainty is doing the nation a great disservice. That is why I say I was completely shocked by the speech of the Chancellor of the Exchequer this morning.
One of the results of the time it takes for our financial affairs to go through the House is that by the time of the Third Reading of the Finance Bill a quarter of the financial year has already passed. I had hoped that the Chancellor would take this opportunity, as many of his predecessors have done, to tell us what he thought of the prospects in the light of his tax

proposals, and not only about what has happened during the last three or four months. About that he chose to say nothing. I should like to reinforce some words which were used by the hon. and gallant Member for Holderness, who said that we all ought to be—as I hope the Chancellor is—giving every care and attention to the development of a possible inflationary movement in this country. After all, what this Bill does is to put upon the country taxes on a scale unprecedented in peacetime, and while on the Third Reading of the Finance Bill one cannot speak about expenditure, it is certainly true to say that if the expenditure was not so high, the taxation would not be so high. Public expenditure today is nearly four times what it was before the war, and most of it is going to be raised by taxation with the exception of the gap which is to be made up by the savings of the people, to which the Chancellor called attention today. The effect of this very high level of taxation on individual incomes is something to which very great attention has to be paid. It is true that some people say and hold that high taxation is in itself a very good protection against any inflationary pressure—that is to say, the more money one takes out of people's pockets by taxation the more purchasing power, to use the Chancellor's phrase on a previous occasion, "is mopped up." Mathematically that is quite convincingly true, but psychologically it is really inadequate, because, while it may be true for a certain amount of the time, it is not true for all the time. Experience has shown that there is a limit in a free society—which we are so far at least, although I do not know for how long—to the proportion of the national income which individuals will permit the Government to take by taxation.
If the taxation becomes unbearably high there is a constant temptation to try to find a palliative in an inflationary movement, and wages and prices go up. This is bound to be the case and it is only human nature. I think it is statistically proved that in any country where the Government takes in taxation more than 25 per cent. of the national income the danger of inflation is automatically developed. The Government are taking more than that today and that is why the situation has to be watched. There are two kinds of inflation: first the spiral runaway whereby we add more notes to


and overrun the valuation of our paper money, which is the kind of thing which has been going on in Hungary. That is the spectacular form which we are not likely to have in this country, but there is also the controlled or semi-controlled inflation which has also to be looked after. I should have liked the Chancellor to have reassured us on that point and to have said that he was giving that problem all the attention which it should receive. I say this all the more deliberately because, after all, it was only on 14th June that he was reported as saying at Bournemouth, according to "The Times," that they had now
reached a point where production of goods for the home market was rapidly increasing. As it rose the fear of inflation diminished. It had largely passed away.
I wish the Chancellor had expanded that when he had the opportunity today, because I do not believe it. It has not passed away at all. It is true that the risk of inflation, the rapid, runaway inflation, may have disappeared in the Continental sense, but, on the other hand, there is still the slow, progressive inflation, of which I see so many signs today, and I cannot see that it has passed away at all, and I wish the Chancellor had told us upon what he based that statement. It is quite true that the runaway inflation is not with us today, for a variety of reasons. One is, no doubt, the restraint by the public in many directions in using their spending power.
I was given some interesting figures the other day which I believe to be accurate. These show that, out of all the amounts paid out by authorised credits—demobilisation and gratuity money and so on—which, up to mid-May, ran to £195 million, only about 4o per cent. had been withdrawn, and, probably, some of these withdrawals had been for the purpose of putting the money somewhere else. That is only half the rate of the corresponding withdrawals after the last war, so that certain people, at any rate, are showing restraint or waiting until times get better. That will have helped, though I would not put it as high as the Chancellor does. The right hon. Gentleman said that the production of goods for the home market was rapidly increasing. It may be getting momentum now, but it has been slow in starting, but, even if it is, it is not from any help on behalf of the Government. The President of the Board of Trade has

done his best to make it difficult by his controls and Regulations, and the Chancellor has helped by pouncing on the very idea of people making increased profit. That has helped to check the large, runaway inflation, and I think it can be described as one of the factors in the passing of the dollar credit, whose passage has been anticipated and expected for a long time.
But, if we grant all that, with regard to the possible warding-off at present of any runaway form of inflation, when we get to the other kind, the slow drift, the danger is still with us, because, while there may be some restraint in certain circles, it is still true that there is today a vast amount of money in the form of purchasing power. We can see that by the tremendous response today to any new capital issues, and by the quite fantastic prices which can be obtained for uncontrolled goods, particularly in the way of valuables. We can see the extent to which this is happening by looking at the figures in the Statistical Digest, which we are now happy to get month by month. After all, the index of wholesale prices, which is one of the things which one has to watch when discussing inflationary movements—and I do not know if hon. Members have realised this—the index of wholesale prices, as shown in that Digest, has risen in the last 12 months a great deal faster than in the previous 12 months. The actual figures, from May to May, are that, in the last 12 months, there has been a rise from 166.3 to 170.7, whereas, in the previous 12 months, the rise was from 163.6 to 166.3—a very considerable increase. We know for ourselves the rise in the cost of utility goods, and, certainly, of things like motor cars, railway fares and coal. Let us also not forget the tremendous increases which have gone on since the Budget was introduced in the subsidies for food in this country. Only yesterday, the Chancellor gave an answer that it was new round about £334 million a year, an increase of 5 per cent. on what he announced at the time of the Budget.
We cannot disguise from ourselves the fact that wholesale price levels are rising and rising at an increasing rate. On the other hand, when we look at the wage position, which is one of the other factors one has to consider, there, I think, the figures show that, while weekly earnings have probably fallen, the week v wage rates are up. If we take the figures


from January to June of this year, the figure of the weekly wage rates went up from 53 to 61, whereas, from January to June of 1945, they went up from 45 to 49. They have thus gone up by twice the rate this year, and we have had very nearly twice the rate of increase in the level of wholesale prices. By the taxation policy of this Finance Bill, the Chancellor is, in some way, contributing to increase this tendency. We have, at different stages of this Bill, pointed out what we thought, and I will not repeat it. It is, however, of the most vital national importance that this problem should be constantly kept in mind, and that steps should be taken to deal with it, instead of which, the Chancellor, at Bournemouth, went exactly the other way and said that the fear of inflation had diminished and had largely passed. It just is not true, and it requires all the energy and all the best financial brains of this country to keep probing this problem and seeing what they can do about it.
The House should make no mistake. If there is this progressive inflation, first of all, controlled, and then possibly, un-controlled—[Interruption.] Yes, possibly. Well, what happens? I am merely making a few points, in order to say that it operates with the utmost unfairness as between different sections of the community. That one might get over, but the really alarming thing is our whole future as an industrial nation, because, at the moment, with a seller's market, it is not the cost of goods but their availability which matters. I think that, today, one could almost sell anything overseas, but that will not last long, and then we may get a situation which is out of control and there is very great danger and difficulty for our future position as an industrial nation. Perhaps the Financial Secretary could tell us something about that. I am merely taking this opportunity again to call attention to the fact that it is not true to say that nothing is happening here. The situation may well be under control, but it has got to be watched all the time, and I think it would have been far better for the Chancellor to have addressed himself to that problem instead of making the silly speech, full of levity, which he gave us this morning.

Mr. Mayhew: No.

Captain Crookshank: Perhaps the hon. Member was not here. Certainly, I invite him to read HANSARD tomorrow, when I think he will come to the conclusion that the speech was not on the level of importance of the high financial matters with which the Chancellor was concerned. The discussions, in the long process of digestion through which our affairs are carried up to the time of the Royal Assent, have been fully justified by the changes, alterations and improvements which have been made in the Bill as it now leaves us. While, as I said just now, we cannot approve of everything in the Bill, we shall certainly not oppose it, as has frequently been done in the past by the Socialist Party. My last words will be to thank the hon. Gentleman for all the care and attention he has given during the passage of this Bill, and to say that I hope he will recognise that we have done our best to improve it. Certainly a number of the criticisms which have been made from this side of the House have been met and to that extent, therefore, I think they were contributions worth making. I would end by saying that we bear the Chancellor no grudge at all tot having kept us here late on two occasions, because we fully realise it was not his fault; it was the Lord President of the Council who issued the decree, and who was the poor Chancellor to say "No"?

Sir W. Smithers: May I ask one question in order to reinforce the very important points made about inflation by the right hon. and gallant Member for Gainsborough (Captain Crookshank) and the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite)? What is the good of £100 a year in old age pension or benefit if the money is worthless because there is nothing to buy in the shops?

Mr. Callaghan: No good at all

2.31 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): May I first of all apologise to the House for the fact that my right hon. Friend the Chancellor of the Exchequer could not remain throughout the Debate? Unfortunately he has an engagement in the provinces and has had to leave somewhat early in order to reach his destination in time.

Mr. Stanley: He will be late for the third race.

Mr. Glenvil Hall: I am very grateful to the right hon. and gallant Member for Gainsborough (Captain Crookshank) for the kind references he has made to myself. As an ex-Financial Secretary to the Treasury he knows, none better, how much I and the learned Solicitor-General, and even the Chancellor of the Exchequer himself, are indebted to the permanent officials, who, behind the scenes, assist Ministers and the House to such a great extent. The right hon. and gallant Gentleman had a good deal to say about inflation and rising prices, and what he said was reinforced by the hon. Member for Orpington (Sir W. Smithers). However, if I attempted to go into detail on the question of inflation, I should be ruled out of Order by Mr. Speaker——

Sir W. Smithers: Why?

Mr. Glenvil Hall: Because it is not in the Bill. I might however say this. It is true that the Chancellor of the Exchequer, in the somewhat rarified air of Bournemouth, indicated that in his view the fear of inflation was passing, and although perhaps Bournemouth is not so bracing as Skegness, I think we have to remember the atmosphere of the place in which he said this, and read no more into it than he intended, namely, that goods are coming back into the shops and there is every indication that such early fears as hon. Members may have had, can be said to be passing. I think hon. and right hon. Gentlemen should read no more into what he said than that. My right hon. Friend realises, we all realise, that there is still some fear of inflation, and he will—I can assure the House on his behalf—continue to watch the situation with the utmost care and take every possible step to see that prices are stabilised, and that all necessary controls are continued. That really is the answer to the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite), who raised this matter earlier in the Debate. He seemed to have formed the impression that the National Savings movement is our only defence against inflation. It is true that it is a subsidiary defence, but that is not its main object, and it is not by any means our only defence. We have certain controls, we have rationing, we have a definite taxation policy, and these together are our main bulwarks against inflation. I admit the fear of it is there, and that the danger has not passed away.

It may be true that prices may tend to go up, but I think what we all mean by inflation is any real, sharp rise in the cost of living.

Mr. Mathers: The policy of the party opposite is to reduce wages.

Mr. Glenvil Hall: My hon. Friend has said that the policy of hon. and right hon. Gentlemen opposite is to reduce wages. Whether that is so or not——

Captain Crookshank: Who said so? When?

Mr. Glenvil Hall: It is not in the Bill, and I do not propose to deal with it now.

Mr. Callaghan: It always has been.

Sir W. Smithers: You reduce them by inflation.

Mr. Glenvil Hall: As quite a number of hon. Members have referred to it, may I mention the question of whether, in reaching the present stage of the Bill, we have spent too much time on it? As the right hon. Member for Gainsborough knows, this matter, amongst others, is now receiving the attention of a Select Committee upstairs. He took the view in his remarks that the amount of time spent on it had been well spent, and that the various stages had been essential in order to achieve the improvements which undoubtedly have been made in the Measure. I do not know that I altogether follow him, and perhaps I might say this before I pass to other points that have been raised. First we have the statement of the Chancellor of the Exchequer in the Committee of Ways and Means; then we have a Debate ranging over the whole field; then we have the Report stage on the Budget Resolutions; then, later, we come to the Second Reading of the Bill which, again, covers much the same ground; then we have the Committee stage, taking the Bill Clause by Clause; then the Report stage when we might quite easily get—it is not outside the Rules of Order if Mr. Speaker so permits—quite long discussions, perhaps for the third time on the same theme; and finally We get the Third Reading. It may well be—I do not know—that the Lord President had this in mind when he suggested that there might come a time when the House would wish to look at this and see whether some of these stages should not either he formalised or cut out altogether.
May I say that I agree that considerable improvements have been made in this Bill, and the right hon. and gallant Gentleman was quite right when he pointed that out. However, I would remind him that they were almost entirely made on the Committee stage, although some of them were not actually embodied in the Bill until the Report stage. He thought that the Government had been unfair in discriminating between the sexes in payment of postwar credits and I therefore take it that he—speaking for his party—would be in favour of both men and women receiving their postwar credits at 65, instead of women getting them five years earlier.

Captain Crookshank: I cannot allow that, because what we had down was an Amendment that they should all be paid at 60. That Amendment was not called. No one suggested that women should be in a worse position than the Government suggested.

Mr. Glenvil Hall: I beg the right hon. and gallant Gentleman's pardon. What he said was that he was against discrimination, and what he says now bears out his earlier statement. It is a matter of opinion, whether we should pay these postwar credits by age stages or by yearly stages to the whole population. It is a matter of opinion and of machinery, and we decided that this was an excellent way of beginning it, particularly as on the last occasion when we had a Finance Bill before us the House generally, or so I thought, was anxious to see the old people get their postwar credits first. We have taken women at 60 and men at 65 largely because that is the age at which the sexes become entitled to old age pensions.
The right hon. and gallant Gentleman thought it was not quite proper for the Chancellor to come down here and say, "I have an extra £2 million to give away in the shape of remission of Purchase Tax. Now, what offers?" Put crudely like that, it does appear that it is not the correct way to act. But that, quite frankly, is not what my right hon. Friend did. After my right hon. Friend had introduced his Budget, we realised that we would lose nearly £50 million in the course of the financial year in the Excise Duty likely to accrue on beer. This made a great difference when he came to deal with

the Committee stage of the Finance Bill. But it always has been normal, so it seems to me, for Chancellors to keep what is sometimes called "something up their sleeve," in order that when they meet the House in Committee they do not have to stonewall all the time; that where, during the Debate, a good case can be made out for a remission here or some concession there, they have some latitude, and are able to meet the point of view put forward, and make the concession asked for. The Chancellor had nothing more than that in his mind when he indicated that he was quite willing to consider what Members had to say in Committee about Purchase Tax, but he indicated that because of the considerable loss of revenue he would suffer this year owing to the drop in duty likely to accrue from beer, further concessions must be limited to approximately £2 million.
The right hon. and gallant Gentleman also said that he looked upon the Chancellor's statement that there might possibly be another tax to take the place of the Excess Profit Tax as a veiled threat. He said, in effect, that it kept industry "on the dither," that they did not know whether at some later stage the Chancellor would not impose an additional tax. Surely, all of us are in that state of suspense, and must necessarily be, from year to year. This state of mind is not confined to industry. None of us know what the rate of Income Tax may be next year, and it seems to me to be asking a little too much, and to be seeking a favour on behalf of industry as industry, to say that they should be told, once and for all, whether they are or are not to have additional taxation imposed upon them in some future Budget. If they feel nervous about it, my advice to them, and to the right hon. and gallant Gentleman for him to pass on to them, is that they should assume the worst, and take it that either next year or the year after, or some year after that, there will be a new tax in the shape of a profits tax. That at any rate would prevent their worrying any more about it, and if it never happened they would be so much better off.
The hon. Member for Harwich (Sir S. Holmes) started off by indicating that private enterprise provided two-thirds of the revenue, and that industrialists, therefore, were entitled to be told what to expect in the way of taxation in the years ahead. Though he was not dealing


primarily with the profits tax, as the right hon. and gallant Member for Gainsborough was, he indicated that his mind was obviously moving along the same lines, and he asked that industry should be told what to expect. The answer to him is the same as the answer to the right hon. and gallant Member for Gainsborough. These Finance Bills and these Budget statements occur normally year by year, and it has never been the constitutional practice to give notice in advance as to what taxation is to be. Individuals do not get such notice, industry and commerce has never had it in the past, and we see no reason why either individuals, or industry, or the City, should now expect to receive it.
The hon. Member, and other hon. Members on both sides of the House who spoke after him, made an excellent point about the incidence of Purchase Tax. The tax is a relatively new one, and we are now reaching a stage when it comes progressively off certain items which the Chancellor, and Parliament, feel should no longer be subject to it. But it is part of the difficulty of the Government that the tax is levied at the wholesale stage, so that when it is reduced or remitted altogether we are up against the problem that certain goods have by then reached the retailer in the shops and that tax has already been paid. The Customs and Excise have looked at this, and we will try, in order to do justice to the ordinary retailer and shopkeeper, to see what, if anything, can be clone to help him where he finds he has a fairly large stock, upon which Purchase Tax has been paid.
The consumer, coming into the shop, and having read in the paper that the Purchase Tax has been taken off a particular article, imagines straight away that he will get that article tax free. Under the law, having paid the tax, the shopkeeper is entitled to pass it on. In most cases retailers who are in this position when the tax is taken off, do pass on what has been paid in tax. The purchaser knows very well, once it is put to him, that he cannot expect straight away to get the tax remission. There are some retailers, who carry heavy stocks, who complain, and naturally come to the Treasury and ask for some relief. All I can say is that we realise this problem; we realise that as the years go on, and these changes are made, perhaps in greater number, the

problem will increase. All I can say here and now is that we will look at it, and if it is possible to devise some method which is fair to all concerned, and not too difficult to work, we shall be only too delighted to put it into operation.
My hon. Friend the Member for South Cardiff (Mr. Callaghan) made, as always, a thoughtful and constructive speech. He dealt with Clause 28, as did my hon. Friend the Member for Blackley (Mr. Diamond). All I can say, in reply to both of them, is that we will watch with the utmost care the working of this particular piece of machinery during the coming months. If it is found that the wording there needs strengthening, the Chancellor of the Exchequer will not hesitate to come to the House and ask for powers to tighten up the law. My hon. Friend indicated, and perhaps I might refer briefly to it, what an enormous burden is being placed on the staffs of the Inland Revenue and the Customs and Excise Departments, who are working at enormous pressure, with very attenuated staff, and sometimes with inadequate accommodation. On behalf of my right hon. Friend I would like my hon. Friend to know that we do realise the difficulties under which the staffs are working, and how much we appreciate their loyalty, both to their work and to the country, in these difficult times.
My hon. Friend put a question about the service of the National Debt, to which perhaps I might be allowed to reply. The £490 million which it now costs is, of course, a very heavy charge. None of us should minimise its weight upon the nation. Nevertheless, we have to remember that since this Government came into office, we have had the benefits of cheaper borrowing, and in the coming year we shall feel to a fuller extent than we have so far the good effect of the policy now being pursued. Since the Budget was introduced, as the House is well aware, we have had very great success with a long-term loan at 2½ per cent. which has brought in £400 million. Many other points were made by hon. Members which honestly I have not time to deal with now. I can only say that they will be noted——

Sir V. Smithers: May I ask the Financial Secretary a question? He was not in the House when I asked this question of the Chancellor, who took a full note of it.
Can the Minister tell me what is the latest figure of the proportion of private income which goes in taxation?

Mr. Hall: No. I am sorry I cannot tell the hon. Gentleman just what the answer is, but if he is interested I will undertake to pass it on to him either by letter or when I see him somewhere in the House. I have not the answer by me. Although many other points were made, I will not detain the House by trying to answer them in detail. I would like to close by saying on behalf of my right hon. Friend that we are grateful to the House for the way in which the Bill has been received. We think the Debates throughout, although some may have been prolonged, have been on a high level. The House has been extremely friendly towards proposals which my right hon. Friend has made and, although the right hon. and gallant Member for Gainsborough said his party do not accept everything which now appears in the Finance Bill, nevertheless, generally speaking, they approve of it and will accept it 'without Division.

Question put, and agreed to.

Bill read the Third time, and passed.

ANGLO-AMERICAN LOAN AGREEMENT

Motion made, and Question proposed, "That this House do now adjourn."—[Captain Michael Stewart.]

2.54 p.m.

Mr. Boothby: I propose to raise this afternoon the question of some of the conditions attached to the American Loan which we have now got. I am not altogether surprised that the Chancellor of the Exchequer is not here. I think he is deeply grateful for that provincial engagement and I do not think he is at all sorry to cast what I think may prove quite a heavy burden upon his very able lieutenant the Financial Secretary to the Treasury. I do not think the Chancellor of the Exchequer wants to answer the questions I am about to put, of which I have given him full notice. I think he has fled to the provinces——

Mr. Turner-Samuels: Does the hon. Gentleman really believe that?

Mr. Boothby: Yes, I do; because in sharp contrast to the great respect and courtesy with which he has treated this House in connection with the Budget, so far as the American Loan is concerned, I will not say he has treated us with contempt, but he has certainly brushed us aside from start to finish. He denied us the promised opportunity to discuss the Bretton Woods Agreement; and for the Loan Agreement we were allowed four days to do what it has now taken the Congress of the United States of America seven months to do——

Mr. James Callaghan: They are giving it; we are taking it.

Mr. Boothby: The hon. Gentleman says that they are giving it and we are taking it. Nevertheless, we might have had a little time to discuss the matter rather more fully before we accepted it.
On the conditions that attach to the American Loan, there are four questions which I want to ask the Financial Secretary. First of all, how are we now going to deal with the problem of our sterling debts? I would like to know if there is any tacit understanding between His Majesty's Government and the Government of the United States of America regarding the method by which we are going to repay our sterling obligations. We cannot use any part of the Loan for this purpose. On the other hand, we cannot afford to dig into our gold and dollar reserves to any considerable extent without fatally weakening our economic and financial position. I think we must realise on both sides of the House, whether we think it is a good idea to accept the Loan or not, that the obligation to establish full convertibility of sterling within one year from now, from which there is no escape, is bound to impose a very heavy strain and burden upon us in this country. When we are all waving our hats in the air about American films and Virginian cigarettes, and that lithe bit of extra petrol, I think we ought constantly to bear in mind the situation which will confront us one year hence, when we take the first plunge into the icy sea of free convertibility and multilateral free trade.

Mr. Spearman: Does the hon. Gentleman realise that that only applies to future commitments? It does not apply to the past.

Mr. Boothby: Yes, but it means that from that moment we shall have to match imports with exports. What is the actual position now? I estimate that annual payments for interest and amortization of our sterling obligations, if paid in full on the basis of two per cent., would amount to about £70 million a year. Add to that £70 million the £30 million which we are ultimately obligated to spend in discharging our debt to the United States, and we get a figure of something in the neighbourhood of £100 million a year of external payments which, at some not very far distant future, we shall have to make. In those circumstances, we shall be driven to increase the volume of our exports from this country not, as I see it, by 75 per cent. above the 1938 level, but by at least 100 per cent. if we are going to get through—and that under conditions of free currency convertibility, unplanned promiscuous trade, and cut throat competition.
How are we going to do it? That is the question I want to ask my hon. Friend the Financial Secretary to the Treasury. I think it is extremely doubtful if we shall ever again be able to export the raw materials and semi-raw materials from this country which we did in the 19th century, and upon which we largely built up our export trade. Even before the war our exports of coal, cotton, textile goods, and iron and steel had all fallen by approximately 50 per cent. as compared with the period before 1914. Between the two world wars they fell by approximately 50 per cent. Do the Government really expect that process to be reversed? Our coal export has now fallen to zero. Do they anticipate being able to export coal in any substantial quantity again over the next 10, 15, or 20 years? I confess I doubt it. Therefore, we shall have to do this job mainly—I should say perhaps almost entirely—through the export of manufactures from this country.
I repeat, how are we going to do it? In August, 1944, Lord Keynes wrote a letter to "The Times," in which he said there was nothing in the Bretton Woods Agreement which would prevent our requiring a country from which we imported to take in return a stipulated quantity of our exports. That letter was instantly contradicted by an American correspondent of "The Times." Whether it was true or not at that time there is no doubt that is not true today, because

under the conditions attached to the Loan Agreement all quantitive restrictions of imports into this country must be non-discriminatory.
There is no doubt about that. This clearly means that we cannot use quotas for the purpose of improving our own trade position either in Empire or foreign markets. This is what alarms me most. If I may summarise the position as I see it, we now find ourselves obliged to build up a colossal export trade. At the same time we are not allowed to make the clearing and payments agreements with foreign countries which would automatically have provided the finance for our trade. Secondly, we shall have to pay our sterling creditors not in goods, but in gold or in dollars, which they can use for the purchase not of British but of American goods We are not allowed to control imports with the object of expanding our economy and our trade by ensuring that the demand for necessities is satisfied before the demand for luxuries is met. Any limitation of imports into this country must be applied generally over the whole field and must, therefore, be restrictive rather than expansionist in character. Thirdly, and perhaps most serious, we are not allowed to impose any restrictions or controls on the import of food into this country with the object of increasing our own agricultural production.
I do not think hon. Members have really grasped the full implications of these proposals. Indeed, I do not blame them because they have not had time to grasp them. The thing was "whistled through" before anybody had an opportunity to realise the full horror of what was happening. Next, we are not allowed to negotiate reciprocal trade agreements for the mutual assurance of markets, which I believe should be the basis of the whole of our overseas trade policy. On the face of it, these are debarred by the commercial stipulations attached to the Loan, under which foreign purchases or sales shall be influenced solely by commercial considerations, and there is to be no discrimination among sources of supply in respect of any imported product.

Mr. Blackburn: That Agreement has not yet been negotiated. There is plenty of opportunity for other countries to object to it.

Mr. Boothby: But we are committed in principle to all these things. We have signed the Agreement. I do not want anybody to be in a position to say later on that we got this money under false pretences. Last, but not least, we are committed in principle to the elimination of Imperial Preference. It is common ground between us, and admitted on all sides, that we have got to build up this terrific export trade. There may be some disagreement about the total figure. Some people may not think that it will have to be as much as no per cent., above the 1938 level, but I personally think that is a minimum figure. But whatever it may be, we must go ahead and build up this tremendous export trade.
I want to ask this simple question. Where are we going to find the markets? In Germany, Austria, or Russia under her closed economy? I would be very glad if they would take some herrings, but I very much doubt if they will—at any rate, not at a price for which the fishermen in Scotland will fish for them. Shall we find the markets in the United States? Again I doubt it. As the greatest creditor nation in the world, the United States of America ought to accept a substantial import surplus. Is there the slightest indication in any part of these agreements that they have any intention in the United States of accepting an import surplus? On the contrary. They are now preparing for a tremendous export drive, designed to achieve an export surplus of 3,000 million dollars a year, and they will naturally concentrate upon the best and most valuable markets in the world today—the markets of the British Empire and South America, our own great markets in days gone by.
I do not propose to ask the Financial Secretary how His Majesty's Government propose to escape from the dilemma which now confronts them, but I ask him specifically whether there exists some secret understanding between us and the American Government as to how we are going to deal with our sterling obligations, which amount to £3,500 million; and the extent, if any, to which they are going to be scaled down. I hope he will not give an evasive answer as the Chancellor of the Exchequer has hitherto given to this question.
We really have been kept in the dark about too many things connected with monetary policy in this country for too

long; and we have a right to know. I do not want to see us suddenly confronted with another "monetary Munich," and told to pass it at 48 hours' notice. We want—and I think we deserve—much fuller information about the negotiations that are about to take place, both in Washington and with our sterling creditors, than we will be given if the policy hitherto pursued continues to be adopted. I do not say that the Chancellor of the Exchequer or some Member of the Government should come down and tell us precisely what is happening in the day-to-day negotiations; but I do think they should make periodic reports of the position to the House, and tell us what attitude they have taken up. So far as what is perhaps the most important economic problem confronting this country—the problem of our sterling debt—is concerned, we have not the faintest idea what the views of the Government are, or indeed if thy have any views at all. We understand only that they were told quietly in Washington where they got off. I think at least we might be told whether there is any truth in that statement or not.
My second question relates to the projected wheat agreement with Canada. I understand this agreement was ready for signature when the Minister of Food went to Ottawa the other day; and then suddenly it was not signed. Why was it not signed? Was it because of pressure applied in Washington? Was it because objection was taken to the draft Canadian wheat agreement, on account of the fact that it violated certain conditions attached to the Loan, or might be held to violate these conditions? If so, did we agree in Washington to hold it up, or to abandon it altogether? Now that the Loan is through Congress, are we going to sign the Canadian wheat agreement? It will look a bit queer if we do it this week or next. We would like the Government to tell us perfectly frankly and candidly what they are going to do. The Minister of Food told us specifically that negotiations had been completed with the Canadian Government, that he was determined to sign the agreement, and he said something to the effect that he would bet that we would sign it. Then he went to Ottawa, and suddenly it was not signed at all; then came the crisis of the Debate on the Loan in Congress; then the Loan went through; and now there is silence. I think this House has a right to know


what are the Government's views about it. Do they agree with the United States Government, that the projected agreement with Canada does violate conditions attached to the Loan? If not, are they going ahead with it and going to sign it? Why did they hold it up? One other question in connection with this. Can the proceeds of this Loan be spent outside the United States? I do not think that question has ever been quite clearly settled and cleared up, either on this side or on the other side of the Atlantic. It is a rather important point.
My third question is very similar to the second one, and relates to the projected trade agreement with Denmark. As I understand it, this provides for a quota of Danish bacon and butter given by us, in return for certain concessions in respect of our manufactured goods. On the face of it, this violates the principle, and, indeed, the practice, of the conditions which we have now signed. Are we going on with this Danish agreement, or are we going to chuck the negotiations? Does this apply also to New Zealand and Australia?

Mr. Mayhew: Which particular part of the agreement does this violate?

Mr. Boothby: The part of the agreement which entitles us, in exchange for granting a quota to Denmark in respect of bacon and butter, to special concessions for our manufactured goods in the Danish market. It is that kind of reciprocal agreement that is, whichever way the agreement is examined, against the terms, and the principles laid down.

Mr. Paget: Which clause is this?

Mr. Mayhew: I do think it is time hon. Gentlemen ceased making this point in their speeches. There is no agreement we have signed outlawing this. We have signed an agreement for discussion at next year's trade conference. These are two very distinct matters. It seems to me that hon. Members should cease making this point.

Mr. Boothby: I do not see why we should, because it is part of the terms of the Loan that we accept all these conditions as matters of principle. We said we would negotiate in detail—for example, Imperial Preference versus tariffs, concession for

concession. But if the hon. Member reads the Agreement carefully, he will see that in principle we have agreed not to do the very thing I was outlining just now. I have not got a copy of the Agreement with me, but I could show the hon. Member various paragraphs which confirm this view. In one of them we agree in principle that certain things are desirable, and that certain other things are undesirable; and that we will work in cooperation with the United States to achieve those which are desirable, and to eliminate those which are undesirable.
My fourth and final point is this. The price level in the United States of America has risen steadily since these Loan negotiations took place, and it continues to rise day by day. It has already cost us over 100 million dollars off the Loan. Suppose it goes on rising, which is no: an impossible assumption? It may reduce the value of this Loan by half, so far as we are concerned; and at the same time I would remind hon. Members that world prices generally are now being raised against us—in the Argentine, even in Canada. Prices are beginning to rise all over the world, and what does that mean? It means that we shall have to export a still higher volume of manufactured goods in order to meet our obligations.

Mr. Mayhew: Will the hon. Gentleman allow me once more? Surely the increase in prices in America and throughout the world will mean that our supplies of foreign exchange are increased for the same volume of exports? The hon. Member was saying earlier that we neeeded to increase the volume of our exports by 100 per cent. over 1938, but will not that problem be eased by the rise in prices in foreign countries and not the opposite?

Mr. Boothby: But we have also to import a very great deal; and I was talking about the price we shall have to pay to buy the things we are going to buy in the United States with the Loan. This is the sole purpose of the Loan; and the prices we are now to be asked to pay are enormously greater than they were at the time when the Loan negotiations took place. I think that is a very serious thing; and I ask the Government how they propose to deal with the situation and whether, if prices continue to rise against us, the Loan will enable us to buy the goods we need in the United States of America? Clearly it will not benefit us if the price level


continues to rise, What are they going to do about it? Are they going to hold the sterling-dollar rate at 4.03 to the £? I do not know when that rate was settled, but I am perfectly certain that it has very little relevance to the situation at the present time, and that it will have less relevance six weeks hence. Is it contemplated that we can revalue sterling, if prices continue to rise, in order to get better value for our own exports? These are very serious matters. It is no good hon. Members pretending that this enormous price rise does not affect the value of the Loan. Of course it affects the value of the Loan. It means already that we shall get 100 million dollars less goods than we should have got at the time of the negotiations.

Mr. Paget: What I do not follow is how that can be corrected by revaluing sterling. The Loan will buy the same number of machines or wheat or whatever it is, whatever its value in sterling, because this is a dollar Loan.

Mr. Boothby: We have raised the Loan in terms of dollars——

Mr. Paget: Exactly.

Mr. Boothby: —but nevertheless, if we revalue sterling, it does mean that in future we shall get for our own goods—this is what matters—a greater number of dollars and therefore of goods from the United States of America.

Mr. Paget: Yes, but the amount of goods we shall get for the Loan will be exactly the same.

Mr. Boothby: The argument which has been addressed to the House and the country by hon. Members on both sides is that this Loan is only temporary, and that we can only discharge our obligations under the Loan if we maintain a much higher volume of exports year by year in the future. What is worrying me, and the question I am addressing myself to, is whether we shall be able to discharge our obligations under this Loan. If prices continue to move against us in the United States of America, there will be no hope of discharging these obligations.
The truth of the matter—only we will not face it—is that we have taken on a fantastic obligation which we might just manage to carry through if we had the

tools to do it; but we have allowed ourselves to be deprived of those tools. In so far as they are intelligible, the conditions attached to this Loan allow the Americans to use the bargaining power of their money; and take away from us the right to use the bargaining power of our own market, which is our main asset. If it is right for the United States to discriminate in the granting of loans, it is right for us to discriminate in granting our custom, which is the best thing we have to offer to the world. Although we have been forced today to pay lip-service to this global and monetary view of trade by the Americans, the fact remains that, in the words of Ricardo,
all commerce is really a trade of barter.
It is, and should be, nothing more or less than the mutually advantageous exchange of goods. I do not know why hon. Members should be so frightened of barter. The Treasury shrinks from the word like a shying horse; but nevertheless it is the essence of trade, and the more you keep money out of the business the better. No comprehensive world plan of trade has been evolved, or is likely to be evolved at the forthcoming conference. How can you have it in the world as it is organised today, with totalitarian Russia occupying one-sixth, and the rest divided between countries with planned national economies of varying kinds and degrees? Are we not to be allowed any regional plan? And if so, what about the Philippine Trade Act signed this year by the United States? That is a regional plan which involves preference. I would conclude by quoting a leading article which appeared in "The Times" the other day which, after saying that we had to accept the Loan and carry out its terms, a statement which I read with some dismay, goes on:
It is a matter of necessity for Britain that in the bargaining envisaged by the Washington agreement each concession from the British side shall be squarely and assuredly balanced by e sure prospect of greater trade elsewhere. In this cooperative design no merely doctrinal arguments, unproved in practice, can in fact exclude the regular provision for essential British supplies, and payment for them, which the present Imperial preferences and the proposed agreements with Canada or Denmark intend to secure, and which the barest British interest demands.
That is the minimum. What I fear is that the Government simply intend to use this Loan to indulge in a kind of illicit spree, at the expense of the future. That is what I gathered from the observations


of the Chancellor of the Exchequer on the priorities he is giving, with consumer goods taking a high place, when we are in this desperate situation, and having this terrific job to do. The chance to get hold of some ready cash quickly in order to cover up for the time-being the deficiencies of their own administration, and the steady fall in output per man hour in this country, was too great to be resisted by the Government: They have got the ready cash for the moment to enable them to cover up what would otherwise be the almost intolerable position which will be disclosed in the next few months, largely due to their own inadequacy. After that the deluge, which, the Tories will have to try to get out of. They will not get away with it as easily as all that.
The choice before us is very simple, and is not obscure. Sooner or later we shall have to repudiate some of the general obligations which we have undertaken in the White Paper, whether they have been specifically negotiated or not. We have a moral obligation to do our best to carry them out; but either we shall have to repudiate a number of these conditions which we have accepted in principle, or, later on, we shall have to repudiate our debts. One or the other. For my part, of these two unpleasing alternatives, I prefer the former; because I believe that in the long run it will do the least damage to Anglo-American relations.

3.20 p.m.

Mr. Blackburn: The House will agree that it is a great advantage to the party opposite to have the hon. Member for East Aberdeen (Mr. Boothby) in its ranks. His views are not orthodox from the party point of view and, therefore, they are able by way of criticism to take advantage of the kind of argument used last night by the right hon. Gentleman the Member for Southport (Mr. R. S. Hudson) regarding private enterprise getting wheat over to this country, and today of the diametrically opposed argument advocating barter and reciprocal trade agreements. While I am sure the House enjoyed the speech of the hon. Member for East Aberdeen, it was hardly fair of him to suggest that the Chancellor of the Exchequer ran away from him. The Adjournment was only allocated during the last three or four days and the hon. Gentleman, being ex-

perienced and much sought after, knows that Members are not in the habit of agreeing to address public meetings in their constituencies without at least having a month's notice. I think, therefore, that the hon. Member ought to withdraw that remark.

Mr. Boothby: By tradition, the House takes absolute priority over all other engagements.

Mr. Blackburn: I am sure the hon. Member would not suggest that a very important matter like that raised today ought to be answered on an Adjournment Debate.

Mr. Boothby: Certainly.

Mr. Blackburn: It is a point of great importance and, obviously, as the hon. Gentleman regards his speech of great importance, it ought to be carefully studied. The second point I wish to make before I come to my main purpose is to refer to the remark made by the hon. Member for East Aberdeen on the famous Loan Debate, a phrase which went round the world:
to sell the British Empire for a packet of cigarettes.''—[OFFICIAL REPORT, 12th December, 1945; Vol. 417; c. 469.]
He referred to cigarettes again today. I do invite his attention to the fact that the Chancellor of the Exchequer in his announcement on Monday of the granting of the Anglo-American Loan did not mention cigarettes at all as one of the purposes for which that Loan is to be used.

Mr. Boothby: Tobacco, of which cigarettes are made.

Mr. Blackburn: I have here in my hand the statement of the Chancellor of the Exchequer and I have read it very carefully. Unless my eyes fail me, tobacco is not mentioned and there is no mention of cigarettes. I should like now to come to the main point of what I intended to say. First, I think the most important item relates to the purposes for which this Loan is to be used. A little play has been made upon the way in which the Loan was announced by the Chancellor of the Exchequer. I am certain that the Chancellor did not intend the order in which he announced the purposes for which the Loan is to be used, to be regarded as an order of priority, and I hope the Financial Secretary to the Treasury, when he comes to reply, will make it quite clear that the


Chancellor of the Exchequer has not yet made any announcement as regards the priorities in respect of the way the Loan is to be used. I hope that he will go one stage further than that and tell us that capital re-equipment is regarded by the Government as the first priority of all.
I have no doubt what was the tenor of what the Chancellor said, but it would be valuable to this Debate if my hon. Friend made it clear once again, because there is misapprehension on the subject in some quarters. I have held meetings recently in my constituency. I held a meeting for housewives on bread rationing, and instead of finding irate housewives there, I found that they were very much more concerned with what we were going to do with the Loan. In particular, they were anxious that the Loan should be used not for the purchase of luxuries for the well to do, such as the total abolition of petrol rationing, which 100 Members opposite advocated in a Motion——

Lieut.-Colonel Sir Thomas Moore: Which would be used for workmen's buses perhaps.

Mr. Blackburn: —but that it should be utilised for permanent benefits which will enable us to compete with the cut-throat competition which we have to meet throughout the word from other nations who have great advantages over us, because they did not go through the bombing or the blitz, and they did not fight in the late war as long and as bitterly as we did.
I therefore hope that at some stage—I am not for a moment suggesting that it should be done now—we shall get a clear-cut plan which can be put to the British people, and which will enable them to see what use is being made by their Government of this Loan for which we are paying, and are bound to pay, so heavy a price. Personally, I am convinced that if we never repay one dollar of this Loan, the United States of America would already have received, in the liquidation of the sterling bloc, the equivalent of 1,000 million dollars.
I would like to follow the point put by the hon. Member for East Aberdeen about the reciprocal trade agreements which he advocated. I do not know whether he represents the party opposite in advocating such agreements. The hon. Member

speaks with great authority, but one wonders whether he carries with him the authority of the Front Bench of his own party. I would strongly urge on the Government the great value of long-term trade agreements and long-term bulk purchases. In a remarkable speech, which those who heard it will not, I hope, forget, my right hon. Friend the Foreign Secretary said at Blackpool—and I regard it as an Election pledge—that the Labour Party stands for bulk purchase. It seems to me that we should take advantage of the present world sellers' market to have long-term bulk purchase agreements which will safeguard the people of this country against the day when an economic blizzard may come. My right hon. Friend the Lord President of the Council, at Bournemouth, said that the Government were setting up economic planning machinery to enable them to guard, in advance, against an economic blizzard which might well start in the United States of America.

Mr. Boothby: Surely, the hon. Gentleman would agree that bulk purchase must, of necessity, be limited to certain standardised articles, and cannot cover the whole field. He will also agree that it is desirable that in exchange for these purchases we should be able to ensure a market for our own goods.

Mr. Blackburn: I have always taken the view that reciprocal bulk purchase agreements are the ideal method for conducting this kind of trade by a Socialist Government. I am trying to deal with this matter quite fairly. I do not think it is clear whether reciprocal bulk purchase agreements are out or not, but I think it is a somewhat academic point. We are the greatest market in the world for goods, and that must create a background of good will which will enable us to be in a position to negotiate logn-term bulk purchase agreements with other countries. You can have a Constitution, but what matters is the way in which it works. It is impossible, by any rigid set of rules, to impose what I might describe as "international free enterprise." If the necessary good will is created by ourselves, we shall be able to enter into the proper planning of our foreign trade over a period of years, and that will safeguard us. I think many of us must have been struck by that remarkable last statement—I hope it will not be considered bad taste to mention it


—made by Mihailovitch, who said, "I and my work have been carried away by the gale of the world." I am sure that many of us must be afraid that the work of any Government in this country, however good, may well be carried away by the gale of the world in the events which may unfold themselves during the next two, three, four or five years. How many people have any confidence that we shall not have a disastrous world slump in the next five years? I hope the Government will take all proper steps to guard against that.

3.30 p.m.

Mr. Lennox-Boyd: I do not wish to detain the House for long, but I wish to refer to an aspect of this Debate in the hope that the Financial Secretary, when he replies, will be able to deal with it in some detail. Let me say, at the outset, that I entirely agree with the concluding words of the hon. Member for King's Norton (Mr. Blackburn). Personally, I think we must view this Loan as a fact, that it has come to stay, and that recriminations about it and charges of bad taste on either side will do far more harm than good. The Loan having arrived, let us hope that it will be used in a statesmanlike way. In order to protect ourselves against the gales of the future, which may arise in the country of origin of this Loan, it is essential that we should protect ourselves in the Imperial sphere, where we are our own master and intend to remain so.
I am sure that the House is grateful to my hon. Friend the Member for East Aberdeen (Mr. Boothby) for the pertinacity which has secured for us this Debate today. In particular, I believe that those of us who are anxious about the failure to sign the Canadian Wheat Agreement, and one or two other rather strange events of the last few weeks, are glad of the opportunity which has now arisen for the Financial Secretary to deal with this particular point. We cannot discuss this Loan in isolation, because the United States is not the only great nation which has given a loan to the United Kingdom. Canada has just given us a substantial Loan and it will not be necessary for my hon. Friend to initiate a Debate on conditions attaching to that Loan, because the Dominion of Canada has attached no conditions to it. Canada has given us a

great Loan, without any conditions, as her contribution to the brotherhood of the world.
In order to put this Loan into perspective, we should remember the other Loans which have been given by the Canadian Government, during the last few years, to our country. Canada, a country of 12,000,000 people, no larger than the combined cities of New York, Chicago, and Philadelphia, has been prepared to attach no conditions to her Loan, and she also lives in a world full of strains and stresses. In 1942, Canada made us a Loan of 700 million dollars, bearing no interest until 1951. This year, the Dominion has made another Loan of 1,250 million dollars, with no conditions attached save the same conditions of interest and repayment as are attached to the American Loan. Three years ago, the Dominion of Canada made us a gift of 1,000 million dollars. At the same time, she remitted to us altogether charges totalling 425 million dollars, which would have fallen on the taxpayers of this country for the air training scheme in Canada.
Also in 1943, three years ago, they repaid all the capital expenditure that we had incurred along with them in establishing munition plants in the Dominion. At the same time, throughout the whole period of the war, they supplied us in mutual aid with goods to the value of 2,000 million dollars, making their contribution to our financial position, the total gifts and loans, 5,500 million dollars, and these were without conditions. I hope that these people who are cynical about the bonds which unite the British Empire will take a lesson from that fact and realise that in a world where the Dominions are free states, free to negotiate their own future without any guidance or hindrance from this country, gifts and loans of that kind can still be given.
As for the Loan itself, millions of Americans—and this is the great misfortune of it—think that they have been extraordinarily generous; millions think they have made Great Britain a present. Thousands of others—and those the most informed—think that they have been very shrewd and have, by the abolition of the sterling bloc and the dollar pool, already got far and away more than they will ever get by any interest or repayment which we may be able to make. As to our people, they are very much divided on this matter


and the Debates that have taken place in Congress have made their own divisions and feelings of national resentment no less harsh, to put it mildly, than they were before. But as I said at the start, the Loan is now a fact and I do not think we can do any greater disservice to Anglo-American relations than to recriminate about it. What we have to do now is to use it sensibly and also to see that we do not surrender anything else which it is not to the British Imperial advantage to surrender. We have given up, as the House well knows, the dollar pool and the sterling area—the one area in this world of anarchy, chaos and uncertainty on which we could rely. We have given that up and deprived ourselves of insulation against any crisis that may come in the future. The American Committee on Economic Development only a few months ago said:
The present position has in it all the menace of another 1929 boom and collapse.''
Yet we have given up that sterling area which enabled us to look the dollar proudly and successfully in the face. We have surrendered a very great deal, but there is one thing which we have not yet surrendered. It is the principle and the fact of Imperial Preference, and the purpose of my intervention in this Debate is to ask the hon. Gentleman if he will add to those other assurances that have been given by his colleagues on Imperial Preference—that preference which, after the economic collapse in the late '20s of this century mainly, and I think almost alone, enabled us to survive the worst of the storm, that preference which short-sighted people called the cause of the world depresion instead of, as it was for the British Commonwealth, the cure of the world depression.
I might say at this stage that I believe that history will never charge us with having used our Imperial resources or preferences selfishly. Any charge that may be made against us will not be that we have used our position ruthlessly or selfishly but rather that we have failed to use it fully and failed to develop our Imperial resources as a whole. As a right hon. Gentleman on this side of the House said lately, there is today an ominous shadow over the field of Imperial Preference. It is to lift that shadow if they can that we look to His Majesty's advisers today. We have very little on

which to go; we know nothing of what went on in regard to the Canadian Wheat Agreement, although we have our suspicions. We have only the Government's published White Papers and statements made in this House. We have here the proposals for consideration by an international conference on trade and employment. They were transmitted by the United States Secretary of State and they envisage the setting up of an international trade organisation. One of the objects of that trade organisation—and this is the policy of the United States Government—is to be the elimination of all forms of discriminatory treatment in international commerce and the elimination of preference. This is their policy. We know perfectly well that the late President Roosevelt said that he intended to initiate an economic policy that would treble American exports and give 60 million more Americans jobs, industrial or otherwise.
So this is the policy they hope to achieve; this is the policy of the United States, but it is most certainly not the policy of Great Britain, and I hope it is not the policy of His Majesty's Government. We shall look for an assurance on that point. We were seriously disturbed at the close of the last year—I think the date was 7th December—by a statement made by the Prime Minister that agreement had been reached with the United States on the broad principles Of commercial policy. Does that mean toe elimination of Imperial Preference? That is one of the principles in this statement, which is the American statement of policy. This all links up with the Loan, and it has been made even more clear by the American Secretary to the Treasury, who said that the passage of the Loan has assured the success of the trade talks which will shortly open. I imagine that he would not have said that unless he had some reason to believe that a consequence of our acceptance of the Loan was that we had undertaken, in the words of the Prime Minister, to agree on the broad lines of commercial policy with the United States, and one of the broad lines, as we see it in this White Paper, is the elimination of all preferences, including Imperial Preference. The United States Secretary to the Treasury has gone even further. He said lately that Britain has promised, in addition, to avoid trade contracts which will discriminate against American pro-


duction. The President of the United States has said that Great Britain has agreed to abolish barriers blocking trade vital to America.
We are entitled, in this House, to have some reassurances in order to put these statements by the American Government in their proper perspective, and to have a renewed assurance from the hon. Gentleman that Imperial Preference has not been given away and that we have given no undertaking of any kind to eliminate it. We have had, lately, some partially reassuring statements by the Colonial Secretary and the Chancellor of the Exchequer, but I think the greatest reassurance we have had takes the form of that treaty to which the hon. Member for East Aberdeen referred—the American Treaty with the Philippines of April of this year. We believe, and I should be grateful if the Financial Secretary will deal definitely with this point, that the fact that America has signed an agreement with a country which is about to become a sovereign independent country absolutely knocks the bottom out of any argument that we are under a moral obligation to abrogate Imperial Preference. We could not have any such obligation in the light of this Treaty.
Perhaps I may give one or two details of this Treaty. We have always claimed that Imperial Preference within the British Empire is a family affair. Indeed, the very phrase "family affair" was first coined, I think, by the Chairman of Ways and Means in America some years ago when refusing to protest against the Canadian grant of a preference to the United Kingdom. The British Empire is joined together by sea. The Russian and American Empires are joined together by land and railways. That is a purely geographical fact, and we have just as much right to unite our own Empire by tariff agreements as they have to unite their own Empires. It is no more their concern what agreements we make with the Dominions and Colonies than it is our concern that the cities of Moscow and Leningrad give 100 per cent. preferences to the Crimea or that New York gives a 100 per cent. preference to California. We have always taken the line that it is a family affair, and that we must be allowed to settle that on our own, and that, if we give full access to the raw materials in our own Colonial Empire, no one can have any grievance because of our trusteeship.
But the United States have gone further, and, in this agreement with the Philippines, America has made a preference agreement with a foreign country, for the Philippines will shortly become a foreign country. They have given 100 per cent. preference to the Philippines for the next eight years, and, after that, a series of elaborate preferences for the next 20 years. For 28 years, they have signed this agreement, on the very verge of the opening of trade talks. They have made it with a people just liberated from the horrors of the Japanese occupation. It is not likely that they will propose to go back upon it. They are now entering upon trade talks with us, having signed the Philippines Agreement and accepting the principle of preference, not within their own territories, but with a foreign country. They have agreed to an elaborate system of quotas from the Philippines for their production into the United States. We would like information on that point. The hon. ember for East Aberdeen mentioned quotas and said he thought that we were precluded, by this White Paper, from agreeing to quotas in future. The United States has, in this Treaty, definitely promised the Philippines quotas for the next 28 years.
Now what is the justification that is put forward? The President of the United States, in defending this proposal—which really needs no defence and it would be very difficult for us on these Benches to criticise—has referred to the unprecedented situation in the Philippines. He also added:
The political independence of the Philippines is totally inadequate without economic stability.
Well, that has been our argument throughout, justifying Imperial Preference in the Colonies and Dominions, that it was no good to sign the Statute of Westminster giving the Dominions political independence if we prevented them from building up their economy by trade preferences. Equally so of the Colonies.
If I might develop this argument—then I will willingly give way to the hon. Gentleman—in the American Congress various speeches have been made which have received very little publicity in the English Press, and extracts from which I think ought certainly to be enshrined briefly in our HANSARD. When this was discussed in the American Congress only


a few weeks ago, these were the sort of remarks made. The representative from Ohio, Mr. Jenkins, said:
At probably no time in the history of the world has one, country shown such fine disposition toward another country which was one of its possessions.
If that is a generous act, to give preference, that is the only right we are asking too, and we are entitled to claim the same tribute with regard to our own preference.
The representative from Tennessee, Mr. Romolu, said:
When you vote for this bill, you will be telling the world that America keeps her promises. … You will be showing all the peoples of the world that the United States … has no desire to abuse its power or to exploit the weak.
and he is defending an Imperial Preference. In rather more elaborate and romantic language, Mr. Stephan of Nebraska ended his speech with these words, which, though biblically inaccurate, I think are anyhow legitimate comment:
Two thousand years ago, St. Paul asked: Am I my brother's keeper?' Today—20 centuries later—we have found the answer. We are our brother's keeper, and the Filipino is, in word and in deed, our brother. We must keep him fed. We must keep him clothed. We must keep him housed. We must keep him economically strong. We must keep him alive. We must keep him free.
And without getting into the same inaccuracies as that representative, we are entitled to claim that most of those ideals are achieved in the British Empire, and in part achieved by our own system of Imperial Preference.
I hope, fortified by extracts of that kind, the Financial Secretary and the Chancellor will go to the forthcoming trade talks with America determined to keep our Imperial Preference, and to use to them some of the arguments that have been used to justify this agreement with a foreign country.
We believe, in conclusion, that our best contribution to this disturbed world is to keep our own house in order in our own Empire. We believe it remains the last bulwark of stability and order in the world, and that in a desperate desire to spread the blessings of international trade all over the world, we may revert to the errors of the last century and the earlier part of this, and by depriving our Empire of the right to make its own

agreements, not only bring about the dissolution of that Empire, but do the gravest possible disservice to the world as well.

3.48 p.m.

Mr. Paget: The hon. Member for East Aberdeen (Mr. Boothby) covered a great deal of ground in a very short time but, in his desire to paint as black a picture as possible of the prospects arising out of this Loan, I think that he sacrificed some degree of accuracy and, indeed, indulged in a great deal of contradiction. Indeed, he pointed out with great force that we are committed to make sterling freely convertible 12 months from the date when the Loan comes into operation. That, of course, only applies to the current transactions. He then went on to say, "So, of course, in 12 months we have to accomplish the task of making our imports pay for our exports." Well, it is just to give us more time to accomplish that task that we have accepted this Loan.

Mr. Boothby: I hope I said, "and exports pay for imports."

Mr. Paget: One of the reasons why we have accepted this Loan is that in the process of converting from peace to war and to a new form of economy as a debtor instead of a creditor nation, we need time. This Loan will, at the end of this year, and for some years to come, give us time to fill precisely that gap between our imports and our exports; so I feel that that was not a very good point.
Then the hon. Member made a tremendous point that from now onwards we were prevented from making bilateral trade agreements or from making bulk sales and purchases. That again is not so. There is nothing in the Loan Agreement to prevent that. That matter is dealt with in paragraph 9 of the Loan Agreement, and I think that the hon. Gentleman will agree that there is nothing in the Loan Agreement to prevent that. There may be, and this is a matter for some dispute, because the proposals, which are really little more than an agenda for a trade agreement, are somewhat vague and susceptible to many different interpretations. But any restrictions of that sort, anything which might affect the Canadian Wheat Agreement or the Danish Agreement do not exist now.
They only might exist after the proposals for the international trade agreement have become a fact.
On that, the hon. Member pointed out that in the circumstances of the world today, an international trade agreement, making all world trade free, which is substantially the basis of this Agreement, is impossible. I agree. I think that that is what will turn out to be the case when they get down to the Conference. I think that this trade agreement will turn out to be manifestly unworkable, when they come down to confer I believe that the international trade conference will come to nothing at all. After all, we are agreed to support this Agreement, only on the basis that everybody else does. The Russians are not even in Bretton Woods yet. I do not see how this can conceivably come into operation without the Russians, and we have seen in other directions just how cooperative they are. I feel that the hon. Member's fears, which are based upon the trade agreement, are, to say the least of it, somewhat premature.
I come to the next proposition, which is that even if there is a trade agreement, however it is dressed up, however Bretton Woods is dressed up; I believe that in effect bilateral trade agreements are inevitable from the very nature of things. One country must always, in given circumstances, be able to afford to buy goods in one place, and not be able to buy them in another. Whether that comes about by varying exchange rates, through the short currency clause in Bretton Woods, or whatever way, countries can only afford to buy imports from countries which are prepared to take their exports. That is a hard economic fact. However much one goes round the mulberry bush one will get there in time. Exports may go to one place and then to another place, but in the ultimate total it must work out in that way. I do not think that any system of trade agreement can really overcome that. The answer, as the hon. Gentleman said, is that foreign trade is barter, and if the trade is to go on we must finally get down to the balance of barter.
I come to my final word because I wish to be short. The hon. Gentleman said this was a spree at the expense of the future. That was an argument which impressed me very much indeed during the original Debate but I was convinced

by the speech made by the hon. Member for Chesterfield (Mr. Benson). I think owing to the refusal of the Americans to accept repayment and the lunatic economic policy which the Americans are pursuing, that inevitably this thing will break down. On the other hand, I feel that by the circulation of goods resulting from this Loan we shall not be in a weaker but in a great deal stronger position—I think the world will be in a great deal stronger position—to face that inevitable breakdown. That was a complicated and difficult economic argument of the hon. Member for Chesterfield. I recommend hon. Members who are impressed by this aspect of the matter to read that speech. Although I was worried at the time—I eventually abstained from voting on other grounds—it was that speech which convinced me upon that issue. I recommend hon. Members to read that speech.

3.57 P.m.

Lieut.-Colonel Sir Thomas Moore: My hon. Friend approached the matter rather from the angle of the economist. I want to approach it from a more human angle. During the last six months of discussion of this Bill in the United States we have learned two lessons. We have learned to see ourselves as others see us, and the picture has not been palatable. Those who have followed the Debate in the American papers must have received many shocks, but I suppose they were probably a good astringent for us after the somewhat misguided ideas that we have had about saving civilisation. The second lesson is the vast benefits that are accruing to America in the breakdown of the dollar pool and the opening up of the sterling area to American trade, as compared with the benefits we get. It has been customary during this short Debate to refer with some scorn to what the Chancellor said the other day as to the priorities the Americans are going to send us. He made a statement about that. I was here and I heard it.
The order of priority was apparently Spam—of course, in its generic term covering tinned goods—tobacco, films, and petrol. They were all mentioned by the Chancellor. I think our affection for Spam has worn a bit thin. Personally, I have not noticed any marked regret among housewives since its disappearance some months ago. Cigarettes undoubtedly are in short supply, but it was said re-


cently that Rhodesia is more than willing to assimilate her tobacco growing to suit our tastes. We have had a visit from the Greek Prime Minister during the past few days during which I understand he came to terms in regard to the production of large quantities of Greek tobacco. Well, we have changed our taste in tobacco once, during the first great war; we can change over again, if necessary. Films are a very doubtful benefit, as everyone will agree, especially in view of the enormous development of the film industry in this country, the rebirth of the French film industry and the slight which many of us feel at the interpretation which Hollywood places on life. I do not think from what I can see—and I read the Loan Agreement through again last night—that we have secured anything like the advantages which the Americans have gained. I think it is wise and proper that we should say so. Many harsh things have been said during the last six months which have gone quite unnoticed.

It being Four o'Clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Bing.]

Sir T. Moore: I cannot agree with my hon. Friend the Member for Mid-Bedford (Mr. Lennox-Boyd), who said, "Let byegones be byegones." I think we ought to make it clear to the American nation, and certainly to some of the leaders in the American Congress, that we accept this Loan with great reluctance. Indeed, there is a fear, of which many Members in this House are well aware, that this Loan is a political racket, just as bread rationing is another one. I do not say I share that view, but I know that that view is widely held in this country among thinking people. They say the only conclusion to be drawn from yesterday's Debate is that bread rationing was proposed simply to make sure that the Loan would be received. They say the Loan was accepted in its present absurd form in order to give to the hard pressed people of this country some compensation for the tragedies and miseries of having to endure a Socialist Government. A strong man in financial difficulties stands on his own feet. He faces his creditors, reduces

his standard of living, alters his way of life, makes sacrifices, and then he pays his debts and pays his way. The weak man who is determined to get money at any price and on any terms goes to the moneylender. In this case the Government have chosen the soft way and have gone to the moneylenders to get their money on any terms and at any price, and I consider it to be a degredation of our history and our grandeur.
Let us remember another thing which, apparently, we sometimes forget, namely, that for 55 years we shall be subject to American criticism and interference in every facet of our foreign, Imperial and domestic policies. We have already seen it. Take the question of Palestine, for instance. We were told in Congress the other day that we would not get the Loan unless we allowed 100,000 Jews to enter Palestine. That is our foreign affairs. We have also had Imperial Preference bartered in the Loan. That is our Imperial policy. We have had criticism of our Government's social and economic experiments. That is our domestic policy. This must go on, and we have to endure it. The Government must make it clear that this Loan is not purely for the benefit of Britain but for the benefit of America, and that Britain is still a proud country and will not tolerate any unnecessary interference in her affairs. Owing to the pronounced inflationary tendency in the United States, during the last few months, to which my hon. Friend the Member for East Aberdeen (Mr. Boothby) has referred, we are informed that the dollar value of the Loan has now depreciated by £100 million. What are the Government going to do about that? How are we going to counterbalance it, and what plans have we in view?
I want to reinforce a question which was put earlier. Must this money be spent only in the United States or not? It was not made clear during the last Debate; I put the same question then, and I will put it again. Is that money to be spent only in the United States? If so, the Americans have it both ways, because they not only get the profits on our purchases but, of course, they get the two per cent. interest on the Loan. I am convinced that if we had stood firm on the policies of justice, decency and economic soundness in our negotiations, which, unfortunately, are now at an end, with the United States, they would have been glad


to press this Loan on us free of interest without the onerous forms and conditions, which Canada so willingly did without. I am sorry that last year this Government was elected. There will be toil, tears and sweat before we have finished with it

4.5 p.m.

Mr. Beverley Baxter: In the very few minutes I have before the Financial Secretary winds up the Debate, I want to say I am very glad of one thing. While we have spoken frankly, on both sides of the House, there has been no real recrimination of any sort against the American Government or the American people. Hon. Members on both sides of the House bitterly resented many things that were said in the debate in Congress, which should not have been said and which make it all the harder to keep a judicial mind towards this very controversial matter. It must be obvious that we on this side of the House are not a united party on this issue. I do not mean the speeches today, which have been sung in peculiarly good harmony with each other. When the Loan was first debated, acting against the advice of our leader, more than 70 of us voted against the Loan; the Front Bench, with two exceptions, abstained, and I believe there were three or four who voted with the Government supporters, but, on the other hand, there were Government supporters who bravely and honestly voted with us. That division in our party still exists.
On Monday, when the Chancellor announced the conclusion of the Loan debate in America, my right hon. Friend the Member for West Bristol (Mr. Stanley), speaking with that honesty which characterises his whole character—and I mean that most sincerely; he is a man of fine character—stood up, I thought rather gratuitously, and said that on his part he welcomed the Loan because he thought without it this country might have reached economic disaster. From the back benches I put the point that it seemed to me it was a prelude to disaster, but that was received with groans from the other side, whereas my right hon. Friend was received with respectful silence. We talk an awful lot about the Loan. I want to put this point. Suppose the Americans had come to London to negotiate this whole transaction. Not that anybody ever comes to London. We go to Moscow; we go to Potsdam; we go

to Teheran; we go to Washington: we are the greatest goers that ever was.

Captain Sir Peter Macdonald: And to Paris.

Mr. Baxter: And to Paris. We are always on the move. Any businessman knows he has to get the other fellow on his own ground if he is to talk to him.

Mr. McAllister: May I remind the hon. Gentleman of one occasion when somebody came to London and I wanted to make this point? In 1937 the New Zealand Government representative came to London to get a £7 million loan.

Mr. Baxter: We cannot start going through the whole of the past of the country. I am talking now about foreigners.

Mr. McAllister: I was talking about the Tory past.

Mr. Baxter: We are as bad as hon. Gentlemen opposite.

Mr. McAllister: The party opposite are worse.

Mr. Baxter: I am not making a party point. This is apparently a national weakness which we have all got. Suppose the Americans had come and had accepted, quite properly, the abundant Government hospitality accorded to those who come to London, and then got down to business. Suppose the Americans said, "We have a proposition to put to you. We want you to place a billion pounds' worth of orders with us, which will take care of our unemployment problem for five years, and we want to charge 2½ per cent. We, of course, will make a profit on the deal. We will get a lot of it back in Income Tax. In addition to that, we want you to do away with your dollar pool, with your tremendous realisation of Empire free trade, and to eliminate Imperial Preference. Tell us, John Bull & Co., what will you do? If you will do that we will do something for you. Sell out your Empire, break up your economic unity of the Empire, and we will lower our tariffs to you in the United States. Thus the world will be happier, international trade will flow like the Mississippi, and all will be well." The business man who would agree to that ought to be locked up in Colney Hatch. The financial


firm that did business like that would go into bankruptcy in six months. They should pay us 10 per cent. interest per year on this Loan for what it really means to them, and I say to the Government that, if they do not intend to eliminate Imperial Preference, they should not create the impression, by saying that they will discuss it, that they do intend to do so. Those of us who have travelled extensively in the United States do not want again to hear our honour impugned because we do not carry through what we say. The Government should take a stand now on this. There is nothing the United States can offer, no concession, that would justify one move towards the elimination—and it is the word "elimination" not "reduction," it is a word that cannot be qualified—of Imperial Preference.
I want to say this to the Government benches opposite—and the Financial Secretary will let me know it I am encroaching on his time: As a Canadian I feel, perhaps, some pride in my own native country because of what she has done, which has been so generously alluded to today, and I feel the right, as an outer Empire man proudly living here, to speak with some emotion on this subject. If the Government try to eliminate Imperial Preference a number of us will conduct such a nation-wide campaign in this country as will light the very beacons on the hills. We will attack them in the market place, in the towns and the cities, we will rouse this whole country against them in such a crusade as will overcome this Government, because we will not have it.
Ribbentrop said once over here, "What is the British Empire? It is held together merely by moonbeams." He thought that you could only have chains to hold an Empire together, but moonbeams cannot be cut But if moonbeams cannot be cut, a cloud can come across the face of the moon, and the moonbeams are gone That cloud is appearing now. Therefore I say this, and I am very grateful to you, Sir, for giving me these few minutes to speak on a subject to which I have given much thought and feeling: The reduction of tariffs in America to us means nothing whatever. The whole of American commerce is tuned to American life. Their advertisements, their goods are all tuned intimately to each other. They will not

take our motor cars, they will not take our films, to any extent. They cannot take much more Scotch whisky than they are drinking now. Textiles, yes; for well-dressed men—but in America the women are well dressed, not the men, and that is not a big market. America says, "We want to trade on a basis of equality in your Empire." The verb "to trade" in America means "to sell," it does not mean to sell and buy. Under the American economy they cannot import. That is the truth about America, and this Government must stop imagining, with over-simplification, that we can make any compensation at all by our exports to America for cutting down Empire unity.
In conclusion, I think it was my hon. Friend on the Front Bench who mentioned that the States of the Soviet Union and the States of America are earth bound, held together by the ground, whereas ours are separated by water. I can remember 1914, when the world was very big, when oceans were oceans; but even so, the call of the blood was enough, and we came across the vast seas because the Empire was bound together, if you like, by moonbeams. Today oceans have become lakes, lakes have become ponds, distance has disappeared The Empire now is physically an economic unit, with every country a few hours away from its companions.
The Empire saved us, itself and the world twice in 25 years. Is there anyone who thought it would emerge from a second world war really intact? It came out stronger, closer knit, with this wonderful sterling bloc, the dollar pool, Imperial preference, and with love for the Mother Country and the Colonies. Now the Government, with this Loan in these terms, are threatening the existence of this marvellous historic accomplishment of the British people. My hon. Friends on this side of the House at all times will raise the wind, whirlwind, if the Empire structure is attacked.

Mr. McAllister: Does not the hon. Gentleman agree that it is natural and right for a Canadian, such as himself, to express the pride we all feel in the British Empire, but it is nauseating in the extreme that the hon. Member for Mid-Bedford (Mr. Lennox-Boyd) and other Members on that side of the House should identify love and respect for the Empire with respect


for the British Tory Party? Does he not remember that in 1939 the Tory Party and the City of London imposed on the New Zealand Labour Government harsher terms for a loan than the Americans are imposing on us for this Loan?

Mr. Baxter: I think that was wrong and wicked, and I said so at the time—I could not agree more.

4.16 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): The House will agree, I think, that we have had an excellent Debate. I have very little time to reply, but I make no complaint about that. One goad thing about an occasion of this kind is that it gives the hon. Member for East Aberdeen (Mr. Boothby), and one or two others who feel almost as deeply and strongly as he does on this matter, an occasion to blow off steam. It was not really essential that anyone should be here for the Government to reply to this Debate; it was enough, it seemed to me, that certain hon. Members should have an opportunity to voice their views once again on this matter. Before I go any further, I would take exception to what the hon. Member said about my right hon. Friend the Chancellor of the Exchequer. This Debate, so far as we knew until about two or three days ago, was not to take place until next week. There was another subject down for the Adjournment today, and so my right hon. Friend and I had every right to stick to the arrangements which we had for today. Fortunately for my right hon. Friend his was such that he had to keep it, but I felt that mine was perhaps not so pressing and should give way, and here I am.
I agree with what the hon. Member for Mid-Bedford (Mr. Lennox-Boyd) said, that it is regrettable now the Loan is through that there should be any recriminations, doubts and queries about the bona fides of the United States. That is to be deprecated now that the Loan is definitely a fact. We have to remember that in spite of the obligations, and in spite of the limitations, and I use the word advisedly, which the acceptance of the Loan may bring, that the opposite view which has not been stressed today must not be lost sight of. If there had been no loan, it would probably have led to an extensive trade war between ourselves and our great Allies across the

Atlantic. Few of us would have contemplated that with any feeling of equanimity.
I should like to underline if I might the tributes that have been paid to the generosity of the Canadian Government and Canadian people for their assistance in these difficult times. It is a most warming feeling to realise how the sister Dominions of the Commonwealth and the Colonies have rallied round the Mother country at this time and are willing to help us in every way. I should like to say before I go any further that there is no suggestion whatever and no fear on the part of the Government that this Loan will threaten what hon. and right hon. Gentlemen opposite refer to as the bonds of Empire. Neither my right hon. Friend nor I see any reason why the Loan should in any shape or form lessen the good will, good feeling and trading relations that bind us to our sister Dominions within the Empire and to the Colonies in the various parts of the world

Mr. Baxter: It is the commitments that accompany the Loan, not the Loan itself.

Mr. Glenvil Hall: I know, but, as I said, there is no truth in it as will be shown in time. The trouble about these things is that we are working largely in the dark. I ought to make it quite plain that many of the points made by the non. Member for East Aberdeen (Mr. Boothby) cannot be refuted or proved correct this afternoon because it is all hypothetical, but we do feel beyond any doubt that he will be proved wrong and the Government will be proved right. Whatever the outcome, the plain fact remains that this House, with the party opposite abstaining, washing its hands of the whole thing——

Mr. Boothby: Not all of us.

Mr. Glenvil Hall: No, not all the party, but officially the party abstained. Not-withstanding that we have now got this Loan and the first instalment of it has been drawn upon. The hon. Member for East Aberdeen asked me one or two questions and some of them were repeated again during the speeches made by those following him. He wanted to know if there were any secret understanding between His Majesty's Government and the Government of the United States regarding the methods by which we are to repay our sterling obligations, and the


extent if any by which they are to be scaled down. This is not the hrst time he has put that query for if my memory serves me right, when he led the well-remembered crusade against the Loan in its earlier stages, he put it almost in the same terms to my right hon. Friend the Chancellor of the Exchequer. Therefore, it gives me great pleasure to tell him, so that he need not ask the question again, that there is not the slightest truth in the suggestion of any secret understanding between this Government and the Government of the United States. We have nothing to hide and there has been no secret pact or secret understanding.

Mr. Boothby: I should like to make it clear that my question was only prompted by an observation made in the United States, as the hon. Gentleman knows.

Mr. Glenvil Hall: I realise why my hon. Friend put it, but lots of things are said in the United States which will not bear the sunlight of examination, and if I may say so, this was one of them.
I have been asked certain questions about the Canadian wheat contract. As the House know, negotiations have been proceeding between representatives of this country and representatives of the Canadian Government on this matter, and all I can say at this juncture is that it is hoped final agreement will be reached quite soon. The United States have been made aware of these negotiations. There is nothing to prevent our continuing them, We have every expectation that they will be completed in the near future.
In this connection, perhaps I should remind the House that in the Canadian Loan Agreement the Canadian Government, quite properly, stipulated that Canadian exports should be treated not less favourably than might be provided under any agreement come to at Washington. That perhaps allays one of the fears expressed by the hon. Member for Mid-Bedford (Mr. Lennox-Boyd).
Another question asked me by the hon Member for East Aberdeen was what would happen now that price controls are apparently off in the United States, and if the dollar begins to depreciate. The House will realise that this country cannot make the United States Government pass an Act imposing price control. To that

extent we shall be in the hands of the United States authorities. Although the Loan has been granted to us, it does not necessarily mean that we shall have to draw upon the whole of it. We shall have to see how things go, but, frankly, what has happened in America, and is happening at the moment, is a disturbing feature. We have no possible means, at the moment, of judging at what level prices will settle down. All we can say is that we have a credit of 1,000 million pounds, and that we propose, over the years, to utilise it, or a proportion of it. We are watching with the utmost care what is happening to prices in the United States.

Mr. Gammans: Has any decision been reached as to what percentage of the Loan will be spent on capital equipment, and what percentage will be spent on consumer goods? Is the hon. Gentleman aware of the danger of living off the seed corn?

Mr. Glenvil Hall: No final decision has been taken as to priorities or the percentage which is to be spent on petrol, newsprint, machinery, or anything else. During the last six months we have been acting—perhaps too hopefully in the mind of some, although our hopes have now been realised—on the assumption that we would get the Loan. Provisional priorities have been established. I have not time to go into all those now, but the House can take it that we want to utilise this money for the benefit of the country in the best possible way, and in the right direction

Mr. Blackburn: Is capital equipment the first priority?

Mr. Glenvil Hall: It is one of the first priorities. We shall utilise some of the money for machine tools and other things, but the housewives in this country do want a little variety in their diet; for instance, one of the priorities is tinned fruit.
A number of other questions were put to me during the Debate, one dealing with the Philippines, another with Imperial Preference, and another with the sterling area. Although Members opposite may not believe me, this Loan will not abolish the sterling area. All it does is to lay down certain stipulations as to what is to happen to dollars and sterling within that area. There is to be freedom for both. The Loan does not, pso facto, abolish the


sterling area. I have not been in touch with the Board of Trade, but we will take note of the agreement which has been made between the Philippines and the United States and, doubtless, when we come to meet them in conference, as we shall, this will play its part in the discussion. We are going into that discussion with our hands pretty well free within the broad limits of the White Paper. We are not committed to details in any way and, I think, the hon. Mem-

ber for East Aberdeen will find that many of his fears, legitimate though they may be on the surface, will not materialise, and that in spite of all the difficulties we shall find that now we have the Loan great benefit will accrue to this country and the world from it.

It being Half past Four o'Clock, Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.